Dollar Reaches 18-Month High as Inflation Expectations Fuel Higher Borrowing Costs

The U.S. Dollar Index (DXY) has reached an 18-month high, trading just above 102 on Friday.

This milestone marks a nearly 4% increase in value for the dollar this year, driven by resilient economic data and stubborn inflation that's cemented expectations for higher borrowing costs.

The greenback has enjoyed its sixth consecutive quarterly gain against a basket of foreign rivals, its longest winning streak since 2022, as investors prepare for central bankers to keep interest rates elevated for an extended period.

This rise comes amid a global bond rout that's driven yields to fresh peaks, with the 10-year U.S. Treasury yield (US10Y) hitting its highest mark since 2002 and putting pressure on the euro (FXE).