U.S. dollar reaches 13-month high amid tech rout, rate hike bets

The U.S. dollar climbed to its highest level in more than a year on Wednesday as a deepening global technology selloff drove investors into safe-haven assets, while growing expectations of a Federal Reserve rate hike added further momentum to the greenback's rally.

Dollar Surges on Flight to Safety

The U.S. Dollar Index rose to 101.51 on Wednesday, its highest level since May 2025, according to trading data. The move extended gains from Tuesday, when the index climbed 0.37% to 101.38 as technology and semiconductor stocks plunged across global markets.tradingeconomics+2

The dollar's ascent was driven by a confluence of factors: a broad flight from risk assets into the perceived safety of the greenback and U.S. government debt, and mounting bets that the Federal Reserve under Chair Kevin Warsh will raise interest rates before year-end. Markets now assign roughly a 70% probability of a rate increase by September, up sharply from 29% just a week earlier, according to the CME FedWatch tool. Prediction market Kalshi showed odds of a 2026 rate hike at 57% as of last week, up from 35% just days earlier.cnbc+1

The Fed held rates steady at 3.50% to 3.75% at its June 17 meeting, but nine of 18 officials projected at least one rate increase this year, with the median dot plot pointing to a year-end rate of 3.8%.bondsavvy+1

Global Tech Selloff Deepens

The dollar's rally coincided with one of the sharpest technology selloffs in months. South Korea's Kospi plunged more than 10% from recent highs, led by Samsung and SK Hynix, which each fell over 12%. On Wall Street, the Nasdaq Composite dropped 2.2% on Tuesday, with the Philadelphia Semiconductor Index declining 7.9%.reuters+3

Nvidia ↘ 4.22% fell 4.15%, while Intel ↘ 28.58%, AMD Advanced Micro Devices, Inc. ↘ 10.88%, and Micron ↘ 5.30% each dropped sharply amid concerns about memory chip oversupply and the sustainability of AI-related spending. Analysts at JPMorgan ↘ 1.90% noted the selloff was partly tied to anxiety ahead of Micron's earnings report scheduled for Wednesday.nbcnews+1

Rate Expectations and Market Dynamics

The stronger dollar added further pressure on risk assets, particularly growth-oriented technology stocks sensitive to borrowing costs. Two-year Treasury yields, which closely track rate expectations, had recently reached 16-month highs before easing slightly on Tuesday as some investors sought refuge in government bonds.reuters

The yen traded near 40-year lows against the dollar at around 161.57, prompting Japanese Finance Minister Satsuki Katayama to discuss currency markets with U.S. Treasury Secretary Scott Bessent. The euro slipped below $1.138, its weakest in a year.reuters

Morningstar ↗ 1.64% analyst Preston Caldwell noted the June dot plot "flips the committee's implied next move from a cut to a hike," underscoring the hawkish shift at the Fed.global.morningstar