US Dollar Index maintains position above 97.50 ahead of Initial Jobless Claims
- US Dollar Index steadies as January FOMC Minutes revived rate hike speculation.
- CME FedWatch indicates the Fed will keep rates at 3.50%-3.75% range in March and April.
- The Greenback gained additional support from strong US data released on Wednesday.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, remains steady after gaining more than 0.5% in the previous session, hovering around 97.70 during the European hours on Thursday.
The Greenback gained ground following hawkish minutes from the Federal Open Market Committee (FOMC). The January FOMC Meeting Minutes revived speculation about possible rate hikes if inflation persists. While nearly all policymakers backed holding rates steady, only a few favored a cut, and officials signaled openness to easing if inflation cools as expected.
Traders modestly pared Fed rate cut bets but still expect two 25 basis points reductions later in the year. The CME FedWatch tool suggests that the Fed will leave interest rates unchanged in the current range of 3.50%-3.75% in the March and April policy meetings.
The US Dollar also received support from strong US data released on Wednesday, which showed Industrial Production rose 0.7% month-over-month (MoM) in January, beating 0.4% expectations and 0.2% prior, marking the largest gain in nearly a year. Core Durable Goods Orders increased 0.9% in December 2025, above the 0.3% forecast, while Housing Starts climbed to a five-month high of 1.404M.
Traders now await the US Initial Jobless Claims on Thursday. Focus will then shift to the Personal Consumption Expenditures (PCE) Price Index and Q4 Gross Domestic Product (GDP) Annualized figures on Friday for further clues on the Federal Reserve’s rate path.
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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