Dollar Index Hits 13-Month High as Gold Falls Below $4,000 and Bitcoin Loses $60K
Miles Bennett
The dollar index hit a 13-month high of 101.8 on Wednesday, driven by widening rate differentials and a repricing of Fed hike expectations; the strong-dollar spillover has pushed gold below $4,000, bitcoin below $60,000, and risk currencies lower across the board.
How much has the dollar gained — and who got hit hardest?
The dollar index touched 101.8, settling around 101.6 in the Asian session — on track for its strongest monthly rally in nearly a year.
EUR/USD broke below 1.14 to a 13-month low of 1.1325; USD/JPY hit 161.73, near a 40-year high.
Risk currencies buckled too: the Aussie dollar fell over 1.8% this week to 0.6890; the kiwi dropped 1.7% to 0.5640, barely above a seven-month low.
Why are gold and bitcoin falling together?
Spot gold traded at $3,985.89/oz, down another 0.4% after breaking below the $4,000 mark — the lowest since November 2025.
Bitcoin briefly dipped below $60,000 for the first time since 2024.
This means → a stronger dollar raises the opportunity cost of holding non-dollar, zero-yield assets. The higher U.S. rates go, the less attractive it is to sit in gold or crypto.
What is powering this dollar rally?
The core engine is widening rate differentials: the 2-year U.S. Treasury yield has climbed 27 basis points since early May to 4.15%, while the German 2-year yield fell 7 bps to 2.56% over the same period.
The 10-year U.S.–German spread widened 20 bps, breaking through 150 bps. In plain terms = the gap between U.S. and European rates is growing fast, pulling capital toward the higher-yielding dollar.
The Iran conflict sent oil prices surging, reversing earlier expectations for Fed rate cuts; new Fed Chair Kevin Warsh struck a hawkish tone in his debut, and traders have now priced in a possible October hike.
How many hikes is the market pricing in?
Per the CME FedWatch tool, markets expect three Fed hikes this year, with a roughly 67% probability assigned to a September move.
This means → the conversation has flipped entirely from "when does the Fed cut?" to "how fast does it hike?" — the biggest expectations reversal in months.
What do analysts say — can the dollar keep climbing?
Steve Englander, head of global G10 FX research at Standard Chartered, argues the dollar reflects expectations of U.S. economic outperformance — both cyclical and structural. AI-driven productivity gains should support higher earnings and dollar-favorable capital inflows.
Brent Donnelly, president of Spectra Markets, flags a shorter-term dynamic: corporate dollar demand is creating a "positive feedback loop" — speculative positioning piles on, technical levels break one after another. But he warns the loop may exhaust itself quickly.
Put simply = one analyst focuses on long-term structure, the other on short-term momentum. Bullish long-term, cautious short-term — that split captures the market's current tension.
What data point matters most next?
All eyes turn to the upcoming U.S. May core PCE — the personal consumption expenditures price index, the Fed's preferred inflation gauge.
Oil prices have already pulled back to pre-conflict levels, suggesting inflation pressure may ease at the margin; overnight, long-dated Treasury yields dropped notably.
This means → if PCE comes in below expectations, the "three hikes this year" pricing could loosen, undermining the foundation of dollar strength — making this the single most important near-term checkpoint.
Content is for reference only, not financial advice.