US Dollar Index Hovers at 2-Month High in Fresh Rally
The US dollar index (DXY) hovered around 98.9 on Thursday, holding near a 2-month high after gaining 0.9% over the previous three sessions, supported largely by weakness in other major currencies.
Market developments are supporting the US dollar rally, though with intermittent sell-offs as sentiment is weak on the economic outlook.
Fed funds rate cuts Optimism persisted after FOMC minutes revealed a consensus to drive employment and achieve a 2% inflation rate.
The dollar was sold off as investors shifted attention to safe haven assets amidst the U.S. government shutdown. Gold was initially sold, but new buying emerged ahead of $4000, and it is near $4038.
There was some, albeit limited, follow-through dollar buying today, but the early gains have been pared as the European morning progressed. That leaves the greenback narrowly mixed among the G10 currencies, with the Scandis, sterling, and the New Zealand dollar underperforming.
The greenback strengthened notably against the yen, following conservative Sanae Takaichi’s victory in Japan’s leadership race, which bolstered expectations for increased fiscal spending. Markets reacted as Beijing announced new export controls on critical minerals and related technology.
At the same time, the euro remained under pressure amid political uncertainty in France, though President Macron said a new prime minister will likely be appointed within 48 hours.
Meanwhile, the ongoing government shutdown continues to delay the release of key economic data, leaving investors with only few private-sector indicators to gauge economic conditions.
Still, traders remain confident that the Fed will deliver two additional 25bps rate cuts this year, after minutes from the latest meeting showed policymakers weighing downside risks to employment against persistent inflation pressures.
US dollar pairs are definitely starting to be on the move even though things have been a fair bit quieter on the week. #US Dollar Index Hovers at 2-Month High in Fresh Rally Access Holdings Ticks Up, Equity Analysts See 60% Upside
