Dollar Strength Driven by Fundamentals

The US dollar has been experiencing broad strength against most G10 currencies, according to Scotiabank's Global FX Strategy team. Led by Shaun Osborne and Eric Theoret, the team notes that oil prices, US yields, and the Federal Reserve's rate path are key drivers of this trend.

The team highlights that the gains in the DXY since early September have been fundamentally driven by 2-year yield spreads. The DXY has moved in tandem with Scotiabank's fair value estimate based on these spreads, which currently stand at 100.5 (compared to the spot price just above 101).

The recent gains have pushed the DXY toward its June 24 high, which marked a local peak and the highest point for the year so far in 2026.