October has emerged as the second-best month for the US dollar in 2025. The Bloomberg Dollar Spot Index rose by 1.7%, marking three consecutive days of gains. The rise is attributed to uncertainty stemming from a lack of US economic data and Jerome Powell’s remarks suggesting that a further rate cut is “far from” a foregone conclusion.

In the absence of solid data, investors tend to read between the lines. The Federal Reserve chair signaled that the regulator is not prepared to continue easing monetary policy without careful consideration. This was enough to provide a modest boost to the dollar, not necessarily due to optimism but rather against a backdrop of weakness in other currencies.

The euro, the pound, and the yen all underperformed in October. Europe is mired in fiscal debates, the UK is facing electoral turbulence, and Japan continues to defend the yen through intervention. In this environment, the dollar stands out as a pillar of stability, though the circumstances surrounding it remain precarious.

“We expect the dollar rally to continue for a little while longer with no major US data releases and focus remaining on the world outside,” Jayati Bharadwaj, a strategist at TD Securities, said. “There are a lot of fiscal and electoral concerns — starting with France, then Japan, then the UK.”

Ironically, the dollar's 2025 performance has been lackluster. In the first half of the year, the greenback recorded its worst performance since 1973, with Washington's tariff policies triggering a currency shock amounting to $9.6 trillion in daily market volumes. The October increase has only slightly reduced the year-to-date decline, bringing it down to just under 7%.

The extended government shutdown has also contributed to market volatility, now entering its 31st day without new data. Investors are left speculating about the economic situation, prompting them to seek refuge in the US dollar. According to Paresh Upadhyaya from Pioneer Investments, the lack of data complicates understanding the economic direction but enhances demand for safe-haven assets.

As Upadhyaya estimates, the American economy is likely approaching a local bottom in the fourth quarter, with the risk of renewed acceleration in 2026. Thus, it appears that the dollar is simply taking a breather between two cycles, one of decline and one of growth.