The US dollar index rose to a six-month high on Tuesday, fueled by expectations for rising inflation risk during a second Donald Trump presidency. The reasoning is related to the possibility that the Federal Reserve may curtail or perhaps reverse rate-cutting plans if inflation rebounds due to potentially reflationary policies driven by higher tariffs and other policy plans outlined by the president-elect. Higher interest rates tend to support a higher dollar relative to other currencies. The Fed would “continue to take a cautious tone going forward, especially in light of what we view as heightened inflation risks in a second Trump term,” predicts Win Thin, global head of markets strategy at Brown Brothers Harriman.
