The Fed Raises Interest Rates, US Dollar Index Reaches Highest Level in a Decade

The United States (US) dollar has strengthened against major world currencies due to The Fed's interest rate hikes throughout 2022. The US dollar index has been above 100 since mid-April 2022.

According to Yahoo Finance data, the US dollar index (DXY) closed at 110.64 on Wednesday (September 21, 2022) local time. This figure is up 0.42 basis points (bps) from the previous day's close and represents its highest level in the last decade, as shown in the graph.

Compared to its position on December 31, 2021, the US dollar index has surged 14,970 bps (15.65%) against six major world currencies: the Euro, Japanese Yen, Canadian dollar, British Pound Sterling, Swiss Franc, and Swedish Krona.

For context, to curb inflation, The Fed has raised its interest rate by 300 bps to a range of 3-3.25% between March and September 2022. This is its highest level in 14 years.

The Fed's interest rate hikes have driven the rise of the US dollar against other world currencies. With the increase in US dollar interest rates, investments in the US currency have become more attractive to investors.

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