The U.S. dollar slid to near three-week lows after hotter-than-expected U.S. inflation data dampened hopes for a near-term Federal Reserve rate cut. This fueled a surge in U.S. Treasury yields and strengthened the dollar index, which rose to roughly 98.5.
As a result, several Asian currencies weakened—most notably the Indian rupee, which fell to 85.94 per USD, though ended the session slightly firmer thanks to intervention from state banks. Meanwhile, the rupee also saw gains earlier today, reaching 85.76, backed by oil price drops and dollar softening.
Broader Trend: A U.S. Dollar “Anti-Bubble”?
This decline marks the worst first half for the dollar since the 1970s, with the DXY falling over 10% in 2025. Market sentiment has shifted sharply: fund managers are increasingly adopting “short-dollar” strategies, even as they back euro positions—the most crowded trades in global markets.
Analysts and investors debate whether this is a sustainable trend or a classic “anti-bubble”—excessive pessimism that could reverse sharply.
Euro Gain & Outlook
- Euro (EUR/USD) has gained around 13–14% YTD, approaching 1.18–1.20
Factors include large ECB stimulus programs, capital inflows, and dovish signals suggesting ECB rate cuts are near complete. - Other currencies, like the British pound, yen, and Canadian dollar, have also strengthened, though to varying degrees.
Today’s inflation surprise reignited dollar strength, but the broader shift remains clear: a sharp U.S. currency decline driven by weak data, global fund flows, and shifting policy expectations. Watch for U.S. macro indicators and central-bank signals in the coming weeks—they could determine whether this “anti-bubble” continues or retraces.
