USD: Dollar edges higher on strong US data and Fed outlook – ING
|The US Dollar (USD) is drifting higher this week, supported by firm economic data and a slightly higher Federal Reserve (Fed) terminal rate, with Dollar Index (DXY) gradually approaching the 100 level, ING's FX analyst Chris Turner notes.
USD strength likely to persist inless rates fall
"The dollar is drifting higher this week on probably what is best described as a macro move. US data has come in on the firmer side, e.g. retail sales and jobless claims, while the Fed's Beige Book presented a view of a gently expanding economy and no immediate threat to the jobs market. Investors have reacted by marking the Fed terminal rate for the easing cycle some 5bp higher this week. That's a 32bp re-rating from the lows seen last October. In response, DXY is edging higher in a very low volatility manner."
"On a quiet Friday, it is worth talking about the release last night of US Treasury TIC data for November. The main takeaway is that foreigners continue to pour money into US asset markets. The TIC release is a volatile data set, but looking at the rolling 12-month average, in November the net foreign purchase of US assets was around $100bn per month – compared to around $25bn in the summer of 2024. November's data was notable for strong flows into equities. Around 45% of the large private sector inflow was in equities. And even the foreign official sector bought $23bn of equities. Yes, it looks like the BRICS official grouping is still offloading Treasuries, but these flows are being dwarfed by the private sector."
"We would again conclude that de-dollarisation is going to take some time and that if the dollar is to come lower this year, it will be driven by lower US rates and increased foreign hedging of US assets. One possible threat to the dollar over the next couple of weeks could come from heavy intervention to sell both USD/JPY and USD/KRW near 160 and 1500 respectively. The US Treasury is sounding supportive of such activity. Above 99.45/50, DXY can probably continue to grind towards 100."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.