US Dollar Index rises for third straight day as safe-haven demand stretches
- The US Dollar Index pushed toward the 100.00 psychological level as Tehran rejects Washington's ceasefire plan and the Strait of Hormuz remains closed.
- Iran rejected the US 15-point peace proposal earlier this week, issuing five counter-demands, including war reparations and sovereignty over the Strait of Hormuz.
- The Fed held rates at 3.50% to 3.75% last week, with one cut still projected for 2026; weekly initial jobless claims edged up to 210K on Thursday, in line with consensus.
The US Dollar Index (DXY) rallied about 0.3% on Thursday, climbing from a session low around 99.56 to trade close to 99.90 as the Greenback continued to attract safe-haven interest for a third consecutive trading day. The DXY has recovered more than three full points from its February low near 96.00, grinding steadily higher over the past five weeks. Thursday's push brought the index within touching distance of 100.00 for the first time since the pullback from mid-March highs near 101.00.
Iran's formal rejection of Washington's 15-point ceasefire proposal on Tuesday further hardened risk-off sentiment. Tehran issued its own list of five counter-demands, including war reparation payments and recognition of Iranian sovereignty over the Strait of Hormuz. The Strait remains effectively closed to Western-allied vessels, and shipping analysts see little prospect of routine commercial transit resuming before year-end. Asian economies are bracing for worst-case energy scenarios: Japan began releasing 30 days of state oil reserves on Thursday, while the Philippines declared a national emergency over energy supply. On Thursday, President Trump said he was unsure whether he would hold Iran to a Friday deadline to reopen the Strait, and suggested taking over Iran's Crude Oil supply remains "an option."
The Federal Reserve (Fed) held the federal funds rate at 3.50% to 3.75% at its March meeting, with the updated dot plot still signaling one cut this year. Chair Jerome Powell acknowledged the conflict amounts to "an energy shock of some size and duration" but said it was too soon to judge the full impact on the US economy. Fed Governor Michael Barr echoed the cautious tone earlier this week, noting rates may need to stay elevated for some time to address inflation. Markets have largely priced out rate cuts for the near term, reinforcing the Dollar's yield advantage over the Euro and the Yen.
US Dollar Index 5-minute chart
Technical Analysis
In the 5-minute chart, Dollar Index Spot trades at 99.92. The near-term bias is mildly bullish as price holds comfortably above the rising 200-period EMA around 99.76, signalling an intact short-term uptrend despite the latest consolidation. Stochastic RSI is rolling lower from overbought territory, indicating waning upside momentum but not yet a decisive reversal while the oscillator remains above extreme oversold levels.
Initial support emerges at 99.90, guarding a deeper pullback toward the 200-period EMA near 99.76. A break below this area would expose the 99.70 region as next downside support. On the topside, immediate resistance stands at the recent intraday highs near 99.96, followed by the psychological 100.00 level, where fresh buying would be needed to extend the advance.
In the daily chart, Dollar Index Spot trades at 99.93. The near-term tone is mildly bullish as price holds above both the 50-day and 200-day exponential moving averages, which continue to edge higher and reinforce an underlying uptrend. However, the loss of momentum signaled by the Stochastic RSI rolling down from overbought toward the lower half of its range warns that upside traction is fading and that the index is vulnerable to a corrective pause rather than an immediate extension higher.
Initial support emerges at the 99.50–99.00 band, where recent lows converge with the rising 200-day average near 99.10, and a break below this area would expose deeper downside toward 98.50. On the topside, immediate resistance stands at the recent high near 100.50, followed by the 101.00 region if buyers regain control. As long as the index holds above the 99.00 area, the broader bias stays tilted to the upside, but a daily close below that support would shift focus toward a more neutral to bearish profile.
(The technical analysis of this story was written with the help of an AI tool.)
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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