The US Dollar Index (DXY) is heading for its best month since June. The index has gained nearly 2% in September amid hawkish Federal Reserve signals.

This tends to weigh on Bitcoin (BTC), yet the largest cryptocurrency has gained 6.14% this month. It now heads into October, historically its strongest month by median return.

What Put the Muscle Behind the Dollar’s Best Month Since June

DXY rose to 101.61 on September 29, its highest level since late July. It traded near 101.4 on Wednesday. Barchart said the DXY is also closing in on its highest close since April 2025. 

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The rally reflects a hawkish turn at the Fed, which raised rates by a quarter point on September 16. Since then, officials have kept further tightening in play.

Fed Governor Michael Barr said additional increases will likely be needed to bring inflation back to target. New York Fed President John Williams said one more hike may be appropriate late this year.

Energy costs feed the same inflation worry that keeps the Fed hawkish. Oil prices remain elevated with US-Iran talks deadlocked. Meanwhile, the 30-year Treasury yield recently hit its highest level since 2002.

Bitcoin Keeps Its Footing While the Greenback Flexes

Bitcoin has historically moved inversely to the dollar, so a firmer greenback tends to pressure its price. Its gain this month has also bucked the calendar, as September has averaged a 2.42% loss.

The rally has also produced 2 signals that earlier cycles tied to recoveries. On September 20, Bitcoin posted its first weekly close above its 50-week moving average since November 2025. Galaxy’s Alex Thorn said such reclaims have historically pointed to bear market lows.

Binance Research, meanwhile, noted that Bitcoin’s September 8 golden cross came after 293 days below its 200-day average. Past crosses after similar deep resets preceded stronger rallies, though the firm cautioned that its sample is small.

October carries a stronger record. Historically, Bitcoin has finished the month higher in 10 of 13 years, with an average return of 19.92%. The month has delivered a median return of 14.71%, the highest of any month.

PCE and Payrolls Could Test Bitcoin’s Nerve

Traders now turn to Wednesday’s Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge. The monthly jobs report follows on Friday.

Hot readings could revive October hike odds, which recently had slipped to roughly even. The Fed’s next policy meeting is on October 28.

Therefore, both releases should show whether Bitcoin can keep rising if the dollar extends its strongest run since June.

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Source: BeInCrypto