US Dollar Index moves to 98.60, daily highs

  • DXY now trades on a firm footing in the 98.50/60 band.
  • Fed repo operation saw Fed Funds drop to 1.90%.
  • Boston Fed E.Rosengren said rate cuts favour higher prices in risky assets.

The US Dollar Index (DXY), which gauges the buck vs. a bundle of its main competitors, has now regained composure and is trading back into the positive territory in the 98.50/60 band.

US Dollar Index keeps the rangebound unchanged

The index is prolonging the choppy trade so far this week, although managing well to keep weekly gains after two consecutive pullbacks.

Nothing changed around the buck in the very near term following the largely anticipated rate cut by the Federal Reserve on Wednesday. In fact, the Greenback should now keep following the developments from the US-China trade negotiations as well as the performance of domestic fundamentals, particularly inflation.

Earlier in the day, a new repo operation by the Fed managed to reduce the Fed Funds rate to 1.90%, alleviating at the same time funding pressure and somehow lending extra support to USD.

Further out, and at his speech earlier today, Boston Fed E.Rosengren stressed the US economy does not need additional monetary policy, adding that rate cuts have a negative impact on prices of riskier assets.

What to look for around USD

DXY keeps the trade within range so far while markets digest the FOMC event and assess another rate cut under the ‘mid-cycle adjustment’. Domestic data in combination of political and trade developments should be key in determining the next decision on rates after Fed’s Powell left the door open for extra easing along the road. Looking at the broader picture, the positive view on the Dollar is still well underpinned by the solid US labour market, strong consumer confidence and spending and the auspicious pick up in consumer prices, all adding to the buck’s safe haven appeal and the status of ‘global reserve currency’. Against this backdrop, the slowdown persists in overseas economies while central banks stick to a more aggressive dovish bias. 

US Dollar Index relevant levels

At the moment, the pair is gaining 0.19% at 98.54 and a break above 99.10 (high Sep.12) would aim for 99.37 (2019 high Sep.3) and then 99.89 (monthly high May 11 2017). On the flip side, immediate contention emerges at 97.86 (monthly low Sep.13) followed by 97.60 (100-day SMA) and finally 97.17 (low Aug.23).

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