Bitcoin resilience tested as U.S. dollar climbs to 18-month high

The Federal Reserve’s September decision to raise rates by 25 basis points to 3.75% to 4% has helped underpin the dollar’s strength. Markets are pricing in further tightening, with a target range of 4.5% to 4.75% emerging as the most likely outcome by June 2027. This rising Treasury yields, alongside concerns over inflation, government borrowing and fiscal sustainability. Long-term U.S. yields have reached levels last seen more than two decades ago.

Euro weakness is another major driver because the it accounts for 57.6% of the DXY basket. The euro has fallen towards 1.12, a 17-month low, as mounting fiscal and political concerns weigh on confidence. France faces increasing pressure over its deficit and borrowing costs ahead of next year’s presidential election. Meanwhile, Spanish Prime Minister Pedro Sánchez has called a snap election for Nov. 29, adding to regional uncertainty.

Despite these headwinds, bitcoin continues to hold around $86,000 after a strong start to October.