The dollar is trading at its highest levels in 7 months, exceeding the level of 106.1 points.

The US dollar index DXY witnessed a sharp increase during trading on Tuesday, reaching its highest levels since the beginning of May, approximately 7 months ago, after surpassing the 106.1-point mark due to substantial gains in Treasury yields amid rising speculation about a lower interest rate cut by the US Federal Reserve.

Current Dollar Status

The dollar index, which measures the performance of the US currency against a basket of 6 major currencies, rose by about 0.60% to record 106.079 points, after briefly touching 106.178 points, the highest level since May 1.

This increase was driven by investors' expectations that higher tariffs under the administration of elected President Donald Trump could significantly raise domestic prices in the US, thereby amplifying high inflation, which could limit the US Federal Reserve's ability to lower interest rates.

Concerns grew as the Republican Party, to which Trump belongs, gained a significant majority in the US House of Representatives (Congress) in the parliamentary elections, reinforcing expectations that Trump may be able to move forward with tax cuts and deregulation after he takes office in January.

A wave of what is being termed “Trump trades” has hit the markets hard, especially after the elected president warned the Eurozone of its lack of US imports and threatened China with tariffs of up to 60%.

Investors are currently looking towards the latest US inflation data for October, which is set to be released tomorrow, Wednesday, as it may provide further signals regarding economic expectations and upcoming monetary policy moves by the Federal Reserve.

Market estimates indicate that the overall Consumer Price Index is likely to rise by 0.2% for the fourth consecutive month, while core inflation is expected to accelerate for the first time since March, amid expectations that the market sees a 60% chance for a 25 basis point interest rate cut by the Federal Reserve in either the December or January meetings.