Whether the greenback's recent strength persists will likely depend on what happens with oil prices and the Fed, strategists say

Aggregate dollar longs rose to the highest level in at least a decade for the week ended June 30.

Investors have recently crowded into bets on a stronger U.S. dollar, encouraged by the greenback's recent upward trajectory.

Whether those bets pay off, however, will depend on whether Wednesday's jump in oil prices holds. Higher oil prices would boost inflation, and with it investors' expectations that the Federal Reserve will raise interest rates to try and quell price pressures.

Higher U.S. rates are generally seen as a tailwind for the dollar.

The ICE U.S. Dollar Index DXY, which measures the greenback against a basket of rivals, was flat Wednesday afternoon, but remained up 2.7% this year, according to FactSet data. The index hit its strongest level in more than a year in late June, although it has since pared those gains.

Speculators have been building up bullish dollar bets in the futures market for weeks - long before President Donald Trump said Wednesday that he believed an interim deal to end hostilities with Iran was "over." Later, during a press conference, Trump denied that the war was back on, saying that the recent U.S. airstrikes were simply a response to Iranian aggression.

Aggregate net long positions in the dollar rose for an eighth straight week in the week ended June 30, reaching $39.8 billion, the largest in at least 10 years, according to Saxo Bank's analysis of CFTC data published Tuesday.

While investors have aggressively ramped up bullish bets, the buck remains well below its most recent multi-decade peak from late 2022. In theory, that could leave plenty of room for the greenback to continue higher.

The latest uptick in oil prices(CL.1) provides yet another tailwind for the dollar, analysts said. Higher crude prices have recently helped push Treasury yields higher as investors see a Fed rate hike later this year as increasingly likely. The dollar may also have benefited as investors looked for a haven from geopolitical risks, according to William Merz, head of capital-markets research at U.S. Bank Asset Management Group.

The minutes from the Fed's June meeting, released Wednesday, appeared to affirm that many top central bankers remain ready to raise rates in the future to tamp down inflation.

Given the dollar's centrality within the global financial system, fluctuations in the currency's value are likely to have spillover effects in other markets. A weak buck is generally viewed as bullish for foreign stocks, while a stronger dollar could weigh on the earnings of U.S.-based multinational companies that earn much of their money abroad.

With speculative dollar longs already looking stretched, even a small shift in rate-hike expectations could spur a substantial reversal, according to Thomas Urano, co-chief investment officer at Sage Advisory.

If rate-hike expectations fade because oil prices move lower, or the labor market starts to weaken, investors could see the buck's 2026 gains start to reverse in a more meaningful way, he added.

-Frances Yue

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July 08, 2026 16:58 ET (20:58 GMT)

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