The US dollar index published by the Federal Reserve, the nominal broad dollar index, closed the first half of 2026 at 120.92 on June 30, about 1% above its end of 2025 level of 119.75 [1]. That small net change hides a wide round trip: the index fell to a low of 117.44 on January 29, climbed to 121.04 by the end of March, dropped back to 118.67 at the end of April, and then rallied to a first half high of 121.41 on June 24 [1]. The main forces were an energy driven jump in US inflation, a Federal Reserve that kept its policy rate on hold at 3.50% to 3.75% while other central banks started to raise, and a June rush into dollar assets. As of July 2, 2026, the index stood at 120.69 [1].
How the US dollar index moved month by month in 2026
The Fed's broad index weights the dollar against the currencies of 26 major US trading partners, so it captures both the euro and yen and the emerging market currencies that dominate US trade. The table below shows month end values from the Federal Reserve's H.10 release, as published on FRED [1].
| Date | Broad dollar index (Jan 2006 = 100) | Change from December 31, 2025 |
|---|---|---|
| December 31, 2025 | 119.75 | 0.0% |
| January 30, 2026 | 117.90 | -1.5% |
| February 27, 2026 | 117.82 | -1.6% |
| March 31, 2026 | 121.04 | +1.1% |
| April 30, 2026 | 118.67 | -0.9% |
| May 29, 2026 | 118.88 | -0.7% |
| June 30, 2026 | 120.92 | +1.0% |
Two things stand out. The dollar's weakest point came in late January, before the energy shock reached consumer prices, and its two strongest months, March and June, coincided with the fastest rises in energy prices and US bond yields. The dollar in 2026 has behaved less like a bet on Fed rate cuts and more like a hedge against higher oil prices.
Why energy inflation supported the dollar
The inflation picture changed sharply in the spring. The Bureau of Labor Statistics reported that the all items CPI rose 0.5% in May 2026 and 4.2% over the previous 12 months, while the energy index rose 3.9% in the month and 23.5% over the year, and gasoline was up 40.5% from a year earlier [3]. Core inflation, which excludes food and energy, was far calmer at 2.9% year over year, with a 0.2% monthly gain [3]. The BLS noted that energy accounted for more than sixty percent of the monthly increase in the all items index [3].
For the currency market, this mix mattered in two ways. A headline inflation rate above 4% removed any near term case for lower US policy rates, which kept short term dollar yields high relative to Europe and Japan. At the same time, the United States is a large net energy producer, so higher oil and gas prices improve its terms of trade relative to energy importing economies such as Japan and the euro area. Both effects point the same way: toward a firmer dollar, even when growth slows.
The Fed held while the ECB and the Bank of Japan raised
At its June 16 to 17 meeting the Federal Open Market Committee kept the target range for the federal funds rate at 3.50% to 3.75%, the same range it has maintained throughout 2026 [2]. The statement said economic activity was expanding at a solid pace, that job gains had kept pace with the workforce, and that inflation remained elevated relative to the 2% goal, partly because of supply shocks that had pushed up prices in sectors including energy [2].
Other central banks were moving. On June 11 the European Central Bank raised its three key rates by 25 basis points, taking the deposit facility rate to 2.25% with effect from June 17, and its staff projected euro area inflation of 3.0% in 2026 with growth of only 0.8% [4]. On June 16 the Bank of Japan raised its policy rate, guiding the uncollateralized overnight call rate to around 1.0% by a 7 to 1 vote, and said it would continue to raise the policy rate as long as its outlook was realized [5]. In a normal year, foreign hikes while the Fed waits would weaken the dollar. In June 2026 the opposite happened, because those hikes were a response to imported energy inflation that hurts Europe and Japan more than the United States.
Which currencies drove the dollar index higher
The broad index is an average, and the pieces moved very differently. Using monthly bars from DataPorium's forex data, the dollar gained against the major reserve currencies but lost ground against several emerging market currencies between the first trading days of January and July 2026 [6]:
- Euro: EUR/USD moved from about 1.1755 to 1.1388, a euro decline of roughly 3.1% [6].
- Japanese yen: USD/JPY rose from 156.8 to 162.6, a dollar gain of about 3.7% [6].
- British pound: GBP/USD slipped from about 1.3453 to 1.3270, a pound decline of about 1.4% [6].
- Mexican peso: USD/MXN fell from 17.97 to 17.55, a peso gain of about 2.3% [6].
- Chinese yuan: USD/CNY fell from 6.99 to 6.79, a yuan gain of about 2.8% [6].
- Brazilian real: USD/BRL fell from 5.48 to 5.22, a real gain of about 4.8% [6].
- Indian rupee: USD/INR rose from 89.95 to 95.24, a rupee decline of about 5.9% [6].
The pattern is consistent with an energy shock. The currencies that weakened most against the dollar belong to large energy importers with low interest rates (Japan, the euro area) or a wide current account gap (India). The currencies that strengthened belong to commodity exporters or economies with high real interest rates (Brazil, Mexico). The dollar index rose because the euro and yen carry the largest weights among the advanced economy currencies in the basket.
What the first half tells investors about the second half
The dollar's direction from here depends on the same three variables that drove it since January: the path of energy prices, the gap between US and foreign policy rates, and whether US inflation stays above 4%. With the Fed on hold, the ECB deposit rate at 2.25% and the Bank of Japan at 1.0%, the United States still offers the highest short term yield among the major reserve currencies, which supports the dollar through carry [2][4][5]. The counterpoint is that the ECB and Bank of Japan are now tightening while the Fed is not, so the rate gap is narrowing at the margin. If energy prices retreat and headline inflation follows, the case for a stronger dollar weakens.
Investors with international holdings may consider how much of their 2026 return has come from currency rather than from the underlying assets, and can track the inflation and rate data behind the next move on DataPorium's economic metrics page.
The dollar gained about 1% in the first half of 2026 not because the Fed tightened, but because an energy shock lifted US inflation and yields while hitting Europe and Japan harder.
Key takeaways
- The Fed's broad dollar index closed June 30, 2026 at 120.92, up about 1% from 119.75 at the end of 2025, with a low of 117.44 on January 29 and a high of 121.41 on June 24 [1].
- US CPI inflation reached 4.2% in May 2026, driven by a 23.5% annual rise in energy prices, while core inflation was 2.9% [3].
- The Fed held its target range at 3.50% to 3.75% in June, while the ECB raised its deposit rate to 2.25% and the Bank of Japan raised its policy rate to about 1.0% [2][4][5].
- The dollar rose about 3% to 4% against the euro and yen in the first half but fell against the peso, yuan and real [6].
- Energy prices, the US foreign rate gap and headline inflation are the variables to watch for the second half.
Frequently asked questions
What is the US dollar index and how is it different from the DXY?
The Federal Reserve's nominal broad dollar index weights the dollar against 26 trading partner currencies, including emerging markets such as China and Mexico, while the ICE DXY tracks only six advanced economy currencies and is dominated by the euro. The broad index closed June 30, 2026 at 120.92 [1].
Why did the dollar strengthen in 2026 if the Fed did not raise rates?
Energy driven inflation pushed US CPI to 4.2% in May, which kept the Fed on hold at 3.50% to 3.75% and kept US yields high, while the same energy shock weighed more heavily on Japan and the euro area, which import most of their energy [2][3].
Which currency fell the most against the dollar in the first half of 2026?
Among the majors, the Japanese yen fell the most, with USD/JPY rising from about 156.8 to 162.6 between early January and early July 2026, a move of about 3.7%, according to DataPorium data [6].
Did any currencies beat the dollar in 2026?
Yes. The Brazilian real, Mexican peso and Chinese yuan all gained against the dollar between early January and early July 2026, helped by high local interest rates in Brazil and Mexico and a strong export performance in China [6].
Sources & References
- [1] FRED: Nominal Broad U.S. Dollar Index (DTWEXBGS), daily data, Federal Reserve H.10
- [2] Federal Reserve: FOMC statement, June 17, 2026
- [3] BLS: Consumer Price Index, May 2026 (released June 10, 2026)
- [4] ECB: Monetary policy decisions, 11 June 2026
- [5] Bank of Japan: Change in the Guideline for Money Market Operations, June 16, 2026
- [6] DataPorium Forex: live and historical exchange rates
