Dollar strengthens amid rising inflation and tariff pressure in US

In June, US inflation rose due to higher prices for imported goods, including coffee, furniture, and appliances. The accelerated price growth led investors to lower expectations regarding interest rate cuts by the Federal Reserve. Against the backdrop of these data, the dollar intensified its recovery, especially against the Japanese yen, which fell to a four-month low.

Rising US bond yields also supported the dollar. The yield on 10-year Treasury bonds hit a one-month high of 4.495%. Investors are now expecting no more than 43 basis points of rate cuts by December, down from about 50 points previously forecast. Such expectations boosted demand for the dollar, which rose to one of its highest levels in a month against a basket of major currencies.

The Japanese yen came under the most pressure, falling to a four-month low against the dollar. The euro and pound sterling also remain near three-week lows. As Nathaniel Casey of Evelyn Partners notes, rising commodity prices may be the first signal of the impact the tariffs are having on the US inflation.