Dollar Index Ticks Higher After Months of Decline
The Dollar Index (DXY) jumped 0.7% and will end the week up 1.3% at current levels, according to Dow Jones Market Data, its best week since September and its fourth straight week in the black, according to market analysts.
The DXY has been steadily ticking upwards for roughly a month. The upward trend is being driven partly by signals that the Fed will continue with hawkish policy, the expectation has already been confirmed with detail from the last minutes.
Some analysts believe the index could reach multi-year highs in 2023 after declining almost consistently since November. Now, the dollar has been slowly regaining some of its strength for roughly a month.
Signs the Federal Reserve might be about to turn down the heat with its rate hikes brought the USD tumbling downwards for 3 months. Investors in the dollar are finding solace in signs that inflation might continue to run rampant.
FOFREX Traders indicate that one of the main reasons for the DXY’s steady increase over the past month was the release of economic data, which showed that inflation is remaining at substantial highs.
Despite the fact that the latest Fed meeting indicated only a 25 BPS rate hike, they fell short of ruling out another more significant hike if needed. At 100.82 at the end of January, investors considered the dollar oversold.
And since the start of February, the US Dollar Index has risen by almost 3.8% – now sitting at 104.67. However, analysts at ING have warned that the upside correction may soon be coming to an end – contrary to most views. Some analysts have suggested that the DXY will reach as high as 115 in 2023, as the USD is a popular safe haven when inflation levels are high.
If inflation is to come under control faster than expected, however, and interest rates are lowered, then the dollar might struggle to retain its dominance over other currencies.
Some currencies such as AUD are considered likely to gain against the USD this year by some experts, as Australia’s central bank has hinted at more aggressive rate hikes to come. # Dollar Index Ticks Higher After Months of Decline