Dollar Hits One-Year High on Safe-Haven Flows, U.S. Rate-Rise Prospects

By Renae Dyer

The U.S. dollar rose to a one-year high against a basket of currencies Tuesday as conflicting signals in U.S.-Iran talks boosted safe-haven assets and as investors bet on the Federal Reserve raising interest rates this year.

Iranian diplomat Esmail Baghaei said there's no scheduled visit from International Atomic Energy Agency inspectors to nuclear sites, according to media reports on Tuesday. Vice President JD Vance had said on Monday that Iran had agreed to allow nuclear inspectors to return to the Middle East country as early as this week.

"The dollar has firmed up in a risk-off-leaning start to the week for markets," ING foreign exchange strategist Francesco Pesole said in a note.

The DXY dollar index rose to 101.186, its highest level since May 2025, in early European trade. The euro fell to a 10-month low of $1.1403, according to LSEG data.

The euro was also dented by Tuesday's weak German purchasing managers' survey, which adds to signs of a fragile eurozone economy and could suggest that a further European Central Bank rate increase might not be needed.

The dollar has continued to rally since last week's Federal Reserve meeting signaled the prospect of increasing rates this year. Nine of 19 officials projected at least one rate increase by year's end, up from none in March. New Chair Kevin Warsh also emphasized the Fed's commitment to price stability and bringing inflation back to the 2% target.

Market pricing on LSEG showed about a 90% chance that the Fed will raise rates by 25 basis points in September.

"U.S. bond yields have continued to move higher, in dissonance with European rates," ING's Pesole said.

This underscores expectations of U.S. divergence on growth, inflation and monetary policy compared to other major countries, which are underpinning the dollar's strong momentum, he said. ING sees the risk of further gains in the dollar.

MUFG senior currency analyst Lee Hardman said the negative shock for U.S. bond yields and the dollar from last year's tariff hikes is reversing, "supported by building evidence that the U.S. economy is continuing to grow solidly and downside risks for the labor market have eased."

However, Barclays analysts said the path to a stronger dollar might be "a bit muddled tactically" in the near term as a number of positive influences appear to be peaking.

"The boost to U.S. terms of trade from higher oil prices is fading following the US-Iran ceasefire agreement," they said in a note.

Write to Renae Dyer at renae.dyer@wsj.com

(END) Dow Jones Newswires

June 23, 2026 05:50 ET (09:50 GMT)