Recently, I noticed that the US dollar index has risen again, reaching 99.47 on Monday, hitting a new high in over a month. This trend is indeed quite interesting. The underlying logic is quite clear: the Iran-U.S. situation keeps energy prices high, inflation expectations are rising, and the market is starting to reprice Federal Reserve policies.

According to the latest FOMC meeting minutes, the Federal Reserve is clearly leaning hawkish, with most policymakers discussing the possibility of raising interest rates if inflation remains high. Danske Bank has directly adjusted its forecast, now expecting rate hikes by the end of 2026 and early 2027, which is completely opposite to their previous expectation of rate cuts. The market now assigns over a 50% probability of a rate hike.

Interestingly, JPMorgan and ING both believe that the US dollar index still has room to rise, especially against the backdrop of intensified bond sell-offs. The dollar index could break through 99.50 and even have a chance to return to the 100 level. However, some voices say that pricing in rate hikes now is premature, so it will still depend on what the Federal Reserve says next.