New York – Global traders have turned the most positive on the outlook for the US dollar since 2015 as bets that borrowing costs will remain elevated for longer have fuelled a monthlong rally in the US currency.
Wagers on a stronger dollar have increased to nearly US$40 billion (S$51.7 billion) as of June 30 – the highest amount in more than a decade, according to Commodity Futures Trading Commission (CFTC) data released on July 6. The latest CFTC data, which includes positions held by asset managers, hedge funds and currency speculators, arrives as the dollar wrapped up a 2 per cent rise in June – one of the best monthly performances this past year.
The rally came after Federal Reserve chairman Kevin Warsh vowed to restore price stability, spurring bets on interest-rate hikes.
Traders’ latest wagers echo the prevailing tone on Wall Street, where strategists at major banks – from JPMorgan Chase & Co. to Bank of America and Goldman Sachs – have touted a turnaround of fortunes for the US currency.
While other major central banks across the globe are seen to be less bold when it comes to raising borrowing costs, the Fed is still projected to tighten policy on a bigger scale versus some of its major peers. That view has bolstered the greenback.
The US currency has strengthened about 0.5 per cent against the Singapore dollar to date in 2026. It was trading at 1.2913 Singapore dollars as at 9.45am on July 7.
“Most of the dollar’s strength is coming from the rates narrative,” said Andrew Hazlett, a foreign-exchange trader at Monex Inc.
Traders currently see the Fed raising rates at least once in 2026. That is in stark contrast from before the start of the Iran war in late February, when traders still saw the central bank lowering borrowing costs in 2026.
After US and Israel attacked Iran disrupting a key waterway for crude tankers, oil prices surged, intensifying inflation fears and alarming policymakers around the world. As the world’s largest oil producer, the United States and its haven currency benefited from the anxieties.
“Fed rate hike expectations combined with the resilience of the US economy have been positive factors for the dollar, given that the growth risks implied by the closure of the Strait of Hormuz will have been greater in the Eurozone and elsewhere,” said Jane Foley, the head of currency strategy at Rabobank.
Despite the optimism, there are still some strategists who argue the rally will soon run out of steam as the market is getting carried away with their expectations of aggressive rate hikes in the US.
Last week’s weaker-than-expected US jobs data helped support dollar skeptics’ case, with hiring slowing sharply in June, dimming bets on rate increases. So far in July, the dollar is slightly lower. BLOOMBERG
