DXY: Dollar Holds Near Seven-Week High Despite Traders Loading Up on Risk Assets

Technology shares and Bitcoin are surging, oil is falling and global risk appetite is improving. Yet expectations for another Fed hike are keeping the dollar firmly supported.

💵 Risk-on fails to dislodge the dollar

• The dollar index DXY traded around 100.4 Tuesday, just below a seven-week high, even as the Nasdaq Composite reached a record and Asian equities rallied.
• Usually, stronger risk appetite reduces demand for defensive currencies. This time, the return available on dollar assets is proving more important.
• The Federal Reserve raised rates last week and warned that its inflation fight was unfinished.
• Traders now assign roughly a 56% probability to another increase in October, up from 43.5% one week ago. Higher expected rates make dollar deposits and short-term US debt comparatively more attractive.

🌍 Rate gaps shape the major pairs

• USD/JPY traded around ¥157.50, near a three-week high. The Bank of Japan raised rates last week, but two dovish dissents and limited guidance disappointed yen buyers. The US–Japan policy-rate gap remains approximately 275 basis points, preserving the appeal of yen-funded carry trades.
• EURUSD held near $1.1470 while GBPUSD traded around $1.3370. Both currencies have avoided a deeper decline, but neither has produced a meaningful challenge to the dollar.
• The European Central Bank and Bank of England also face inflation pressure, leaving the market to compare degrees of hawkishness rather than cuts against hikes.
• China’s yuan is the notable exception, strengthening toward 6.695 per dollar — its highest level in more than three years. The People’s Bank of China has relaxed its resistance to appreciation before this week’s Trump–Xi summit, making the move partly policy-managed rather than evidence of broad dollar weakness.

📊 What could finally move DXY

• The 100 level is the immediate technical pivot for the dollar’s gauge. Remaining above it would preserve the recent breakout and keep the seven-week high within reach.
• A sustained move below 100 would suggest that lower oil and Treasury yields are finally beginning to outweigh the Fed’s hawkish message.
• US flash PMIs and speeches from Federal Reserve officials will test expectations for another increase. Firm activity, employment or price data would reinforce the dollar’s yield advantage.
• Softer numbers — particularly evidence that energy inflation is fading — could reduce October hike bets and release some pressure on rival currencies.