What's behind the recent strength of the U.S. dollar?

From Marketplace in Washington, I'm Kimberly Adams.

The U.S. dollar hit a more than one year high this week on the U.S. Dollar Index,

ticker symbol DXY, if you were curious, which measures the greenback against a basket of foreign currencies.

The dollar's up about 5% since dipping to a recent

low in late January before the Iran war started, and it's been rising in fits and starts

ever since. Marketplaces Mitchell Hartman explains what's behind the increase.

The dollar's recent rise is mainly driven by differential economic growth and interest rate expectations between

the U.S. and other big economies. U.S. economic growth has been strong recently, and consumers

continue to spend it up. Jonas Goulterman at Capital Economics says the Federal Reserve is

responding as expected. They've stopped talking about cutting interest rates, and they've started talking about hiking interest rates.

Meanwhile, Europe, the UK, and other developed economies are hurting more from the spike in energy prices

and can't afford to hike interest rates without squelching growth.

And so that differential moves in favor of the U.S. and the dollar strengthens.

And here's what the recent dollar strengthening is not, says Joseph Ganyo at the Peterson

Institute for International Economics, investors fleeing to safety in troubled times.

This is not a safe haven's fight. The April 2025 Liberation Day tariffs coupled with all the

anti-foreign rhetoric rhetoric, has really

dented the safe haven attractiveness of the dollar.

Ganyo says what's going on here is just the heightened lure of U.S. interest rates and dollar-valued

assets, plus the underlying pull of our big, relatively strong economy.

The investors just love U.S. financial assets.

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