The US dollar remained on course for its strongest monthly performance in almost a year on Monday as investors continued to back the currency on expectations of higher interest rates and confidence in the strength of the US economy.
The greenback also found support from renewed tensions in the Gulf, where uncertainty surrounding a fragile ceasefire between the United States and Iran kept financial markets on edge and lifted oil prices.
The two countries exchanged fresh attacks over the weekend before agreeing to halt hostilities and hold talks in Qatar on Tuesday. While the planned meeting offered hope for easing tensions, investors remained cautious as they waited to see whether the ceasefire would hold.
The dollar index, which measures the US currency against six major peers, stood at 101.34, close to the 13 month high reached last week. It is now set to record a gain of around 2.5 percent in June, marking its best monthly performance since July 2025.
The euro recovered slightly during Monday’s trading, rising 0.2 percent to $1.1399. However, the common currency was still heading for a monthly loss of 2.4 percent after touching a 13 month low against the dollar last week.
The US currency has strengthened against every major currency this month, with some of the biggest losses seen in Scandinavian and Antipodean currencies, which have fallen between 4.7 percent and 7 percent.
Markets have shifted sharply in recent weeks as investors moved away from earlier expectations of interest rate cuts. Instead, they are increasingly preparing for higher borrowing costs after stronger inflation data and a more hawkish tone from new Federal Reserve Chair Kevin Warsh.
The rally in US technology stocks, driven by continued excitement around artificial intelligence, has also encouraged investors to move more money into American assets, adding further support to the dollar.
Jane Foley, chief foreign exchange strategist at Rabobank, said the latest gains were significant because many investors had spent much of the past year discussing the possibility of a longer term decline in the dollar.
She said there was still room for a shorter term upward trend, adding that delayed pricing of US rate increases, compared with central banks such as the Bank of England and the European Central Bank, had helped strengthen the currency. She also pointed to strong demand for US stocks since the conflict in the Gulf began.
Data from market regulator reports showed investors were holding their largest bullish position in the dollar against other major currencies since 2019, with total positions valued at about $36.4 billion, according to LSEG.
Attention is now turning to this week’s US employment report, which could offer fresh clues about the Federal Reserve’s next move on interest rates. Money markets are currently pricing in one rate hike this year, with around a 50 percent chance of another increase.
Investors will also closely follow the European Central Bank’s annual forum, which begins on Monday. ECB President Christine Lagarde will open the event, while Warsh is scheduled to speak during a key policy discussion on Wednesday.
His remarks are expected to provide further insight into the Federal Reserve’s outlook and could shape expectations for the direction of global financial markets.
