US Dollar Index: Breakout risks build on hawkish Fed – OCBC
Source Fxstreet
OCBC’s Sim Moh Siong notes the Dollar is supported by higher US Treasury yields and a more hawkish Federal Reserve path, with leaner Fed communication likely to lift FX volatility. The bank still sees a rangebound USD, but warns that a clear DXY break above its 14‑month range could deliver 2–3% upside, with larger gains if Oil rises or US growth overheats.
Hawkish Fed and yields underpin Dollar
"The Fed’s hawkish shift is keeping the USD supported as markets price a more aggressive policy path. Treasury yields rose across the curve despite weaker oil, pointing to rates, not energy, as the key driver."
"Chair Warsh’s leaner communication style, seen in a shorter FOMC statement, shifts focus to incoming data and should lift FX volatility. May US core PCE is next, though softer oil may mute the signal even as headline inflation is set to rise to 4.1% YoY."
"Risks to our rangebound USD view are building. A clear DXY break above its 14-month range could open 2–3% upside."
"A larger 5%+ rally is a tail risk if oil climbs above USD100 per barrel or AI-led US growth overheats, marked by declining unemployment rate and rising medium-term inflation expectations."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: For information purposes only. Past performance is not indicative of future results.
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The downturn occurred despite the reopening of the U.S. government on Thursday, which many had hoped would provide essential support for crypto markets. This year initially appeared promising for cryptocurrencies, particularly after the inauguration of President Donald Trump, who has established the most pro-crypto administration thus far. However, ongoing political tensions—including Trump's tariff strategies and the recent government shutdown, lasting a historic 43 days—have contributed to several rapid price pullbacks for Bitcoin throughout the year.
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Notably, Bitcoin is not alone in its struggles, as Ethereum and Solana have also recorded declines of 7.95% and 28.3%, respectively, since the start of the year, while numerous altcoins have faced even steeper losses.
Looking ahead, questions linger regarding the viability of the four-year cycle thesis, particularly given the increasing institutional support and regulatory frameworks now in place in the crypto landscape. Matt Hougan, chief investment officer at Bitwise, remains optimistic, suggesting a potential Bitcoin resurgence in 2026 driven by the “debasement trade” thesis and a broader trend toward increased adoption of stablecoins, tokenization, and decentralized finance. Hougan emphasized the soundness of the underlying fundamentals, pointing to a positive outlook for the sector in the longer term.
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