The US dollar continued to show resilience this week, with the widely followed US Dollar Index (DXY) hovering near the 98.0 mark, supported by safe-haven demand and mixed economic signals that have kept currency trader’s alert. After a recent period of volatility, the greenback’s movements reflect a complex interplay of tariff policy uncertainty, central bank expectations, and risk sentiment shifts in global markets.
Dollar Index Near 98.0 as Traders Weigh Headlines
According to the latest market data, the DXY was trading around 97.77–97.91 on February 25, 2026, representing a slight uptick from earlier sessions. Over the past month, the dollar has strengthened modestly by roughly 0.9 %, even as it remains historically lower than its levels a year ago, which were nearly 8 % higher over the 12-month span.
Analysts emphasize that the greenback’s recent support has come not from a single dominant factor but from a blend of market dynamics. In particular, ongoing geopolitical tensions and tariff policy uncertainty tied to recent US trade actions have boosted demand for the dollar as a perceived safe-haven currency in times of rising risk and shifting global economic sentiment.
Risk-Off Sentiment Supports the Dollar
Part of the dollar’s stabilization stems from risk-off pressures across global markets. Recent tariff developments rekindled concerns about trade conflict escalation, prompting some investors to reduce exposure to risk assets like stocks and cryptocurrencies and instead rotate capital into cash and dollar-denominated instruments.
This behavior aligns with typical currency market patterns: when risk appetite wanes, the US dollar often attracts flows as a global liquidity anchor. Although equity markets have shown resilience at times, headline risk and macro uncertainty continue to underpin demand for the greenback.
Fed Expectations and Interest Rate Outlook
Another key factor affecting dollar dynamics is the outlook for US monetary policy. The Federal Reserve’s latest communications have underscored a cautious, data-dependent approach to interest rates, with markets now pricing in a moderate probability of rate stability in the near term. While rate cuts are broadly anticipated later in 2026, the precise timing and magnitude remain uncertain.
This “higher for longer” stance, relative to other major central banks, helps keep the dollar attractively priced versus some peers, especially in a context where interest-rate differentials still favor US assets. Traders are closely watching upcoming inflation data, employment reports, and Fed commentary for clues on future policy adjustments.
Tariff Policy Uncertainty Moderates Strength
Despite the dollar’s modest gains, uncertainty surrounding US tariff policy has acted as a counterbalance. Legal and political developments earlier in February dampened some bullish sentiment for the dollar, as a US Supreme Court ruling invalidated parts of previous tariff authority, prompting market reassessment of trade policy risks.
While alternative legislative and executive actions may be pursued, including new tariff implementations, the policy ambiguity has weighed on currency traders, contributing to near-term oscillations in the dollar’s trajectory.
Impact on Markets and Other Currencies
The dollar’s movements have rippled across financial markets. A firmer dollar tends to suppress commodity prices, particularly those priced in US dollars such as gold, and can impact emerging market assets by making dollar-denominated debt more expensive to service.
Conversely, a strong greenback can exert downward pressure on major currency pairs like EUR/USD, with analysts noting that the euro has softened in part due to the dollar’s relative strength. Traders are monitoring technical levels in FX markets as currency correlation patterns continue to evolve in response to macroeconomic developments.
Outlook: Range-Bound but Sensitive to Headlines
Looking ahead, market forecasts suggest that the dollar’s near-term moves will likely be range-bound around the 95–100 zone, shaped by key economic data releases and geopolitical developments. Forecast models point to a scenario where the greenback might display mild softness toward the mid-90s by year-end if rate cuts accelerate and global risk sentiment improves.
However, in the event of renewed risk aversion, especially if trade tensions escalate or inflation surprises, the dollar could reclaim stronger footing, with safe-haven demand driving renewed inflows.
Bottom Line
As of February 25, 2026, the US dollar remains at a critical juncture: supported by safe haven flows and interest rate differentials yet constrained by trade policy uncertainty and mixed macro signals. For currency traders, the evolving landscape underscores the importance of closely watching key economic data, Fed guidance, and geopolitical headlines that could swiftly shift the dollar’s direction.
