Comment as of Thursday June 26, 2025: PM

The Dollar Index, a multi-currency index that excludes the Chinese Yuan from its composition, has dropped 10.8% since the end of February, 2025.

The Weekly Index trendline has diverged from its wide, long-term, slightly positive channel, and is now at a three-year low.

On June 12-13, the Russian government forced the U.S. Dollar off of Russia’s large central trading exchange (MOEX), as the Yuan is now designated as the Central Bank of Russia’s “Benchmark” currency. Now anyone in Russia or dealing with Russia who wishes to use the USD for trade must use interbank markets instead of open exchange trades on the MOEX to price Rubles or Dollars, making it significantly more expensive and less transparent. The direct effect on the Dollar Index is not large.

The new sanctions will also put pressure on others who trade with Russia, as there are terms that threaten to isolate entities that interact with Russian buyers of technology and other war-supportive goods. The downstream effects will emerge in the next few weeks and months.

The next technically definable upside target, at 108.81 on the Index is a retracement ratio of 61% of the entire move down from the September 2022 highs. A central factor is the rise in interest rates, ultimately a wheat price negative for U.S. origins, as it makes purchases more expensive through the foreign currency translation to U.S. dollars needed to complete transactions. The trend on a break above the 108.8 level will be confirmed as higher.

*A “Real Interest Rate” equals the observed market interest rate adjusted for the effects of inflation. The nominal US Real Interest Rate is at -1.19%, compared to +2.21% last year. The Current rate of inflation is higher than the yield of short-term treasury paper. The effect is to make the U.S. dollar and/or government notes and bonds less attractive in global markets versus any other currency or paper of nations whose real interest rates are positive.

The U.S. Dollar Index is heavily weighted toward European currencies. The Chinese Yuan should be followed alongside the Dollar Index for a more complete assessment of Dollar value in the world. (see below)