Traders are most positive on the US dollar since 2015 as Fed hike looms

[NEW YORK] Global traders have turned the most positive on the outlook for the dollar since 2015, as bets that borrowing costs will remain elevated for longer have fuelled a month-long rally in the US currency.

Wagers on a stronger dollar have increased to nearly US$40 billion as at Jun 30 – the highest amount in more than a decade, according to Commodity Futures Trading Commission (CFTC) data released on Monday (Jul 6).

The latest CFTC data, which includes positions held by asset managers, hedge funds and currency speculators, arrives as the dollar wrapped up a 2 per cent rise in June – one of the best monthly performances in 2026.

The rally came after Federal Reserve chairman Kevin Warsh vowed to restore price stability, spurring bets on interest rate hikes. 

Traders’ latest wagers echo the prevailing tone on Wall Street, where strategists at major banks – from JPMorgan Chase to Bank of America and Goldman Sachs Group – have touted a turnaround of fortunes for the US currency. 

While other major central banks across the globe are seen to be less bold when it comes to raising borrowing costs, the Fed is still projected to tighten policy on a bigger scale versus some of its major peers. That view has bolstered the greenback.

“Most of the dollar’s strength is coming from the rates narrative,” said Andrew Hazlett, a foreign exchange trader at Monex.

Traders currently see the Fed raising rates at least once this year. That is in stark contrast from before the start of the Iran war on Feb 28, when traders still saw the central bank lowering borrowing costs in 2026. 

After US and Israel attacked Iran disrupting a key waterway for crude tankers, oil prices surged, intensifying inflation fears and alarming policymakers around the world.

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As the world’s largest oil producer, the US and its haven currency benefited from the anxieties.

“Fed rate hike expectations combined with the resilience of the US economy have been positive factors for the dollar, given that the growth risks implied by the closure of the Strait of Hormuz will have been greater in the Eurozone and elsewhere,” said Jane Foley, the head of currency strategy at Rabobank.

Despite the optimism, there are still some strategists who argue the rally will soon run out of steam as the market is getting carried away with their expectations of aggressive rate hikes in the US. 

Last week’s weaker-than-expected US jobs data helped support dollar sceptics’ case, with hiring slowing sharply in June, dimming bets on rate increases. So far this month, the dollar is slightly lower. BLOOMBERG