US Dollar Index: Rally extend to near 101.00 as hawkish Fed narrative takes hold
- The US Dollar rises further to near 100.90 on hawkish Fed narrative.
- Fed officials warn that energy shocks and strong demand are both fuelling inflation.
- Investors keenly await flash US S&P Global PMI data for September.
The US Dollar trades higher as financial markets embrace hawkish Federal Reserve (Fed) view. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.35% higher to near 100.90, the highest level seen in over seven weeks.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.37% | 0.51% | 0.33% | 0.17% | 0.71% | 0.65% | 0.23% | |
| EUR | -0.37% | 0.13% | -0.04% | -0.18% | 0.34% | 0.27% | -0.13% | |
| GBP | -0.51% | -0.13% | -0.15% | -0.32% | 0.21% | 0.14% | -0.19% | |
| JPY | -0.33% | 0.04% | 0.15% | -0.15% | 0.36% | 0.32% | -0.03% | |
| CAD | -0.17% | 0.18% | 0.32% | 0.15% | 0.52% | 0.47% | 0.12% | |
| AUD | -0.71% | -0.34% | -0.21% | -0.36% | -0.52% | -0.06% | -0.39% | |
| NZD | -0.65% | -0.27% | -0.14% | -0.32% | -0.47% | 0.06% | -0.35% | |
| CHF | -0.23% | 0.13% | 0.19% | 0.03% | -0.12% | 0.39% | 0.35% |
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).
A slew of Fed officials has not ruled out the possibility of more interest rate hikes in the remainder of the year in their latest commentary as they see inflation risks to be persistent due to energy shocks and strong demand.
Fed rhetoric keeps Dollar bulls on the front foot
Brown Brothers Harriman’s Elias Haddad highlights that Fed officials are reinforcing the prospect of additional tightening, noting that “more tightening is in the pipeline.” He points out that St. Louis Fed President Alberto Musalem, a non-voter this year, cautioned that “further rate hikes may be needed to curb inflation,” while Chicago Fed President Austan Goolsbee, a 2027 voter, warned of “more aggressive and more and more front-loaded” rate hikes if demand is overheating. Haddad argues this evolving policy backdrop underpins the Fed’s hawkish stance and continues to support the US Dollar’s relative appeal versus the Euro, Pound and Yen.
Meanwhile, investors await the preliminary US private sector Purchasing Managers’ Index (PMI) data for September, which will be published at 13:45 GMT. The S&P Global PMI report is expected to show that the overall business activity expanded at a moderate pace due to a slowdown in both manufacturing and the services sector.
US Dollar Index Technical Analysis
Bias: In the daily chart, Dollar Index Spot trades at 100.90. The near-term bias is bullish as price holds above the 20-day exponential moving average (EMA) at 99.84, reinforcing a constructive pattern of higher closes.
Momentum: Momentum is strong, with the Relative Strength Index (14) hovering just below the overbought threshold at 69.52, which suggests persistent buying pressure but also warns that the rally may be prone to consolidation phases.
Support: On the downside, initial support is located at the psychological level of 100.00, followed by 20-day EMA around 99.84.
Resistance: Looking up, the asset is expected to exten the rally towards the July 28 high at 101.64.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
