The US dollar heads into the second half of 2026 on a high, thanks to bets for higher US interest rates and an unquenchable thirst for US assets from investors chasing the “American exceptionalism” that may spell more pain for other currencies.
Dollar Performance
The dollar is the best performing currency at the half-year point, up 3% and contrasts with a year ago, when it was nursing a fall of more than 10%, in its biggest first-half dive since the early 1970s, on US tariff policy.
A strong US economy powered by an AI boom means investors still anticipate the next move in rates to be up, not down. This bolsters the dollar, already boosted by geopolitical tension.
A hawkish tone from new Federal Reserve Chair Kevin Warsh keeps the focus on inflation, which remains well above the Fed’s 2% target. Traders expect at least one rate hike this year and a 50/50 chance of a second, from no move a few weeks ago.
Global Impact
Policymakers from Auckland to Zurich are contending with weaker currencies, which could raise national import bills. Energy prices are down, but the cost of food, travel and other goods and services have all soared.
South Korea’s won has hit record lows, fuelling a frothy stock market and troubling regulators. Emerging markets such as India have propped up their currencies, or jacked up rates to ward off dollar strength.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
