United States Dollar Index trades firmly above 100.00 while approaching to weekend
- The US Dollar holds onto recent gains near 100.27 on the final day of the weekend.
- The Fed hiked interest rates by 25 bps to the 3.75%-4.00% range and signaled more in the remaining year.
- Investors shift their focus to the flash US private sector PMI data for September.
The US Dollar (USD) consolidates in a tight range during the Asian trading session on Friday, but is close to its highest level seen in the last six weeks. At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near 100.27.
The US Dollar outperformed this week as the Federal Reserve (Fed) raised interest rates by 25 basis points (bps) to the 3.75%-4.00% range and traders have repriced interest rate expectations.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.99% | 1.20% | 2.28% | 0.81% | 0.46% | 1.55% | 0.95% | |
| EUR | -0.99% | 0.19% | 1.26% | -0.18% | -0.52% | 0.55% | -0.04% | |
| GBP | -1.20% | -0.19% | 1.09% | -0.37% | -0.72% | 0.37% | -0.26% | |
| JPY | -2.28% | -1.26% | -1.09% | -1.45% | -1.83% | -0.79% | -1.38% | |
| CAD | -0.81% | 0.18% | 0.37% | 1.45% | -0.33% | 0.73% | 0.10% | |
| AUD | -0.46% | 0.52% | 0.72% | 1.83% | 0.33% | 1.08% | 0.48% | |
| NZD | -1.55% | -0.55% | -0.37% | 0.79% | -0.73% | -1.08% | -0.63% | |
| CHF | -0.95% | 0.04% | 0.26% | 1.38% | -0.10% | -0.48% | 0.63% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
According to the CME FedWatch tool, the odds of the Fed delivering at least one more interest rate hike have increased to 88% from 66.3% seen a week ago.
Hawkish Fed bets have accelerated as the Fed’s dot plot showed that 16 of 18 Federal Open Market Committee (FOMC) members see at least one interest rate hike in the remaining year. Also, upside inflation risks communicated by Fed Chairman Kevin Warsh at the press conference have supported interest rate hike expectations. “Inflation is too high and has been for too long,” Warsh said.
Next week, investors will focus on the preliminary United States (US) S&P Global Purchasing Managers’ Index (PMI) data for September, which will be published on Wednesday.
US Dollar Index Technical Analysis
In the daily chart, Dollar Index Spot trades at 100.26. The index has pushed back above the 20-day exponential moving average (EMA) at 99.56, tilting the near-term bias bullish as price consolidates over reclaimed trend support. Momentum is constructive, with the 14-period Relative Strength Index (RSI) hovering near 62, suggesting sustained buying pressure without yet entering overbought territory.
On the downside, initial support is seen at the 20-day EMA around 99.56, which underpins the latest advance and would be the first line of defense on any pullback. A daily close above 100.26 would reinforce the bullish bias, keeping the focus on further gains as long as the index holds above the short-term average.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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