- DXY got boosted by ongoing Japanese “concern” about the strength of the Yen.
- Negative EU and UK economic data are also helping the DXY.
- The market will look for “further gradual adjustments” in interest rates as opposed to simply “gradual adjustments” in the FOMC minutes
The US Dollar Index (DXY) is now trading around 89.83 in the New York session, up by 0.13% and off the earlier daily high of 90.00 as the market may be trimming positions ahead of FOMC minutes. DXY bounced back by almost 2% from the recent low of 88.25 on short covering in the last few days ahead of FOMC minutes later in the day.
All eyes are now on the FOMC minutes to see if US policymakers pledged to make “further gradual adjustments” in interest rates (hawkish) as opposed to simply “gradual adjustments” (dovish) at January’s meeting, the last under former Fed ´s Chair, Janet Yellen.
The market is concerned that Fed may shift from three rate hikes into 4 this year due to upbeat US economic data and concerns of higher fiscal/tax deficits and inflation, otherwise Fed may find itself behind the inflation curve.
DXY got a boost on Wednesday Asian session on renewed jawboning by Japan after its top “FX diplomat” Asakawa said that the Yen's recent moves have been one-sided. Also, Yen lost some strength on poor Japanese Manufacturing PMI data.
Apart from weakness in Yen, DXY got further boost on weaker EUR amid softer-than-expecte EZ PMI data and a slump in GBP after a subdued UK job report and wage data along with ongoing Brexit saga.
Meanwhile, the US sold 5-year notes at 2.658% vs 2.660% expected for the $35 bln 5YUST. The overall auction today may be on the strong side, but not enough for any USD volatility.
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