Dollar gains 1% across 10 currencies after Fed's hawkish hold

The US dollar strengthened against every major and emerging-market currency Tuesday, with commodity and central European pairs bearing the brunt of a selloff triggered by the Federal Reserve's hawkish policy stance.

The dollar rose against all 10 major currencies tracked in New York trading Tuesday, with the Australian dollar falling 1.27% and the Swedish krona dropping 1.29%, as last week's hawkish hold by the Federal Reserve continued to drive demand for US assets. The euro and pound each declined 0.41%, while the Hungarian forint weakened 1.36% against the greenback, exchange rate data show.

Commodity currencies were hit hardest. The Australian dollar slid 1.27%, the New Zealand dollar fell 0.79%, and the Mexican peso dropped 1.15%. The South African rand weakened 0.89% and the Brazilian real lost 0.89%. Scandinavian currencies also sold off, with the Swedish krona down 1.29% and the Norwegian krone falling 1.05%. Central European currencies weakened across the board, with the Hungarian forint declining 1.36% and the Polish zloty falling 0.67%.

The broad-based dollar strength reflects two converging forces: the Federal Reserve's hawkish repricing and a risk-off shift in global markets. Last week, the Fed held its benchmark rate steady while indicating fewer cuts than markets had priced, pushing US 10-year Treasury yields higher. The dollar index extended those gains Tuesday as traders reduced exposure to higher-beta currencies.

Rate differentials widen in dollar's favor

The Fed's hawkish stance has widened rate differentials in favor of the dollar. Markets now price a potential rate hike in late 2026, according to OIS pricing, a sharp reversal from the easing cycle anticipated at the start of the year. Higher US bond yields have drawn capital inflows, particularly from emerging markets where currency volatility has increased.

For India, the rupee fell 0.06% against the dollar Tuesday, paring a six-day winning streak that had been supported by lower oil prices and Reserve Bank of India measures. The RBI last week announced steps to attract foreign portfolio flows, which could bring tens of billions of dollars into Indian markets. The USD/INR pair now trades in a 94.0 to 95.5 range, with the 94.04 Fibonacci retracement level providing support.

Oil prices, which had fallen after the US-Iran truce last week, remain a wildcard for currency markets. Lower crude prices benefit oil-importing nations like India and Japan but weigh on commodity-linked currencies such as the Norwegian krone and Canadian dollar. The Canadian dollar fell 0.37% against the greenback Tuesday.

Data releases in focus

Traders are watching this week's US data releases, including the core PCE price index — the Fed's preferred inflation gauge — durable goods orders and initial jobless claims. Stronger-than-expected data would reinforce the dollar's rally, while weaker readings could offer relief to battered currencies. The next Fed meeting is scheduled for July, where markets will watch for any shift in the dot plot or forward guidance.

This article is for informational purposes only and does not constitute investment advice.