Bitcoin resilience tested as U.S. dollar climbs to 18-month high

Major currencies typically move less sharply than stocks or cryptocurrencies, but shifts in monetary policy and investor confidence can trigger explosive moves.

The U.S. Dollar Index (DXY), which measures the dollar against a basket of six major currencies, reached roughly 102.5 on Monday, its highest level in nearly 18 months. Having climbed from around 99 in early September, it is now comfortably above its 200-day moving average, also near 99, a signal of strengthening bullish momentum.

A stronger dollar typically creates headwinds for risk assets by increasing the cost of servicing dollar-denominated debt outside the U.S. and reducing overseas investors’ purchasing power. When accompanied by higher U.S. interest rates, it also makes cash and government bonds more attractive, raising the hurdle for investing in stocks and bitcoin BTC$86,094.20.

The Federal Reserve’s September decision to raise rates by 25 basis points to 3.75% to 4% has helped underpin the dollar’s strength. Markets are pricing in further tightening, with a target range of 4.5% to 4.75% emerging as the most likely outcome by June 2027. This rising Treasury yields, alongside concerns over inflation, government borrowing and fiscal sustainability. Long-term U.S. yields have reached levels last seen more than two decades ago.

Euro weakness is another major driver because the it accounts for 57.6% of the DXY basket. The euro has fallen towards 1.12, a 17-month low, as mounting fiscal and political concerns weigh on confidence. France faces increasing pressure over its deficit and borrowing costs ahead of next year’s presidential election. Meanwhile, Spanish Prime Minister Pedro Sánchez has called a snap election for Nov. 29, adding to regional uncertainty.

Despite these headwinds, bitcoin continues to hold around $86,000 after a strong start to October.