Bitcoin Faces Fresh Test as U.S. Dollar Hits 18-Month High

Bitcoin is holding near $86,000 despite a stronger U.S. dollar and elevated bond yields, which could create a tougher environment for risk assets. At the same time, fiscal concerns in France and political uncertainty in Spain are putting additional pressure on the euro.

Major currencies generally experience smaller price swings than stocks or cryptocurrencies, but changes in monetary policy and shifts in investor confidence can still produce sharp moves.

The U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, climbed to around 102.5 on Monday, marking its highest level in nearly 18 months. The index has risen from roughly 99 in early September and is now firmly above its 200-day moving average, also near 99, reinforcing the bullish trend.

Dollar strength can weigh on risk assets because it raises the cost of servicing dollar-denominated debt outside the U.S. and reduces the purchasing power of international investors. When higher interest rates accompany the stronger dollar, cash and U.S. government bonds become more appealing, making investors demand a higher return before committing capital to equities or bitcoin.

The Federal Reserve’s September rate decision has also supported the dollar. The central bank raised its policy rate by 25 basis points to a range of 3.75% to 4%. Markets are now pricing in additional tightening, with a 4.5%-4.75% target range emerging as the most likely outcome by June 2027.

Higher Treasury yields have added to the pressure, alongside concerns about inflation, government borrowing and the sustainability of U.S. fiscal policy. Long-term Treasury yields have climbed to levels last seen more than two decades ago.

Weakness in the euro has provided another boost to the DXY because the currency represents 57.6% of the index. The euro has slipped toward $1.12, its lowest level in 17 months, as political and fiscal concerns weigh on sentiment.

France is facing growing scrutiny over its deficit and borrowing costs ahead of next year’s presidential election. In Spain, Prime Minister Pedro Sánchez has called a snap election for Nov. 29, adding another layer of political uncertainty across the region.

Despite the challenging backdrop, bitcoin has remained relatively resilient, trading around $86,000 after gaining momentum at the start of October.