US Dollar Index trades broadly firm above 100.00 amid fears of widening Iran conflicts
- The US Dollar shows broader strength amid fears of US ground military action in Iran.
- Fears of a US ground invasion of Iran have boosted oil prices further.
- Traders have fully priced out interest rate cuts by the Fed this year.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally lower near 100.15 in the Asian trading session on Monday after retracing from its intraday high of 100.35. Still, the USD Index is close to its two-week high.
US Dollar Price Last 7 Days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.29% | 0.48% | 0.35% | 1.23% | 2.16% | 1.53% | 1.32% | |
| EUR | -0.29% | 0.19% | 0.09% | 0.95% | 1.85% | 1.26% | 1.04% | |
| GBP | -0.48% | -0.19% | -0.15% | 0.75% | 1.68% | 1.06% | 0.78% | |
| JPY | -0.35% | -0.09% | 0.15% | 0.83% | 1.76% | 1.12% | 0.85% | |
| CAD | -1.23% | -0.95% | -0.75% | -0.83% | 0.93% | 0.29% | 0.08% | |
| AUD | -2.16% | -1.85% | -1.68% | -1.76% | -0.93% | -0.62% | -0.89% | |
| NZD | -1.53% | -1.26% | -1.06% | -1.12% | -0.29% | 0.62% | -0.27% | |
| CHF | -1.32% | -1.04% | -0.78% | -0.85% | -0.08% | 0.89% | 0.27% |
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).
The US Dollar (USD) opened higher as fears of further widening conflicts in the Middle East have escalated amid reports claiming the United States (US) ground invasion of Iran. Heightening geopolitical tensions improve the demand for safe-haven assets, such as the US Dollar.
On Thursday, a report from the Wall Street Journal (WSJ) showed that the US Pentagon is considering sending 10,000 additional military troops to Iran for ground military attacks. In response, Iran’s Parliament speaker Mohammad Bagher Ghalibaf also said that Iran would "rain fire" on any US troops attempting to enter Iranian territory, BBC reported.
The ground military attack by the US army could mark a fresh escalation in the Middle East war, a scenario that might disrupt energy supply further and boost oil prices. As of writing, the WTI Oil price is up almost 2.5% above $102.00.
Persistently higher oil prices would force traders to raise bets supporting tight monetary conditions by the Federal Reserve (Fed) this year. Fed hawkish prospects have already strengthened as higher oil prices have boosted gasoline rates in the US.
According to the CME FedWatch tool, traders have almost priced out an interest rate cut and see a 24.6% chance of a hike by the year-end, a sharp turnaround from two rate cuts projected before the war started.
Meanwhile, US President Donald Trump has expressed confidence, in an interview with the Financial Times (FT), that a deal with Iran will be “very quickly”.
On the macro front, the US economic calendar is fully packed, with the notable release of the Nonfarm Payrolls (NFP) data for March this week on Friday.
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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