US Dollar Index: Negative bias builds with policy headwinds – DBS

DBS Group Research strategist Philip Wee notes that the US Dollar Index (DXY) Index is struggling to regain the 100 level, with European currencies better reflecting underlying Dollar weakness once Japanese Yen (JPY) volatility is excluded. Wee also flags US trade policy uncertainty and legal challenges to tariffs as additional headwinds, alongside reduced expectations for a September Federal Reserve rate hike.

DXY struggles near key threshold

"The DXY Index’s negative bias is becoming increasingly difficult to ignore, following four failed attempts to reclaim the psychological 100 threshold."

"Filtering out the JPY’s correction (-0.36%) on Tuesday, following its acute rebound driven by joint US-Japan interventions, the strength in the European currencies – EUR (+0.19%), GBP (+0.14%), and CHF (+0.14%) – better represented the greenback’s underlying weakness."

"Following last week’s underwhelming FOMC meeting, the futures markets cut the probability of a September Fed hike to 58% from 72%."

"US trade policy uncertainty remains another headwind for the USD."

"The US Court of International Trade reported that the Trump administration had refunded about $100bn or 60% of the Liberation Day tariffs collected, following the US Supreme Court’s ruling against the tariffs under the International Emergency Economic Powers Act in February."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)