The US dollar ended the week with its most significant strengthening in four months. The dollar index gained 0.9%, reflecting a sharp revision in market expectations regarding the Federal Reserve's monetary policy and increased demand for safe-haven assets, Bloomberg reports.

Minutes from the Federal Reserve's latest meeting showed that the regulator remains cautious about cutting rates due to persistent inflation. Moreover, some committee members did not rule out the possibility of further tightening.

Strong labor market data confirmed the resilience of the US economy, reducing the likelihood of aggressive easing. Investors are now pricing in a rate cut of only 58 basis points in 2026, down from 63 basis points expected a week earlier.

Geopolitical factors are providing additional support for the dollar. The increased US military presence in the Persian Gulf and heightened rhetoric surrounding Iran have boosted demand for safe-haven assets. At the same time, rising oil prices are weakening traditional safe-haven currencies like the yen and euro, redistributing capital flows in favor of the dollar.

Until the beginning of this week, speculative players held the highest volume of short positions on the US dollar since June. The release of strong macroeconomic data forced market participants to quickly close short positions, strengthening the upward momentum and accelerating the dollar index's rise.