Dollar index at 7-week low
US dollar fell today to 7-week low as the uncertainty over when the Federal Reserve might begin reducing its stimulus weighed on the prospects of higher yields in America. The dollar index (DXY) fell to 81.167. A break below 81.05 will make US currency more vulnerable for further declines. Resistance lies at 81.576 and 82.41. A rise above the latter would probably mean the resumption of the larger bullish trend.
Last month the greenback reached a 3-yeat high as the markets bet that the Fed will be ahead of other central banks to reduce monetary stimulus. Now the market players aren’t so sure about that.
Still, according to data from Bloomberg, USD remains the second-best performer this year with a 4.3% increase (EUR is at the first place with a 5.6% gain). Options traders are bullishly positioned on USD, paying a premium to buy the currency versus all 16 of its major counterparts except the yen. JPMorgan expects DXY to return to July highs in the medium term.
Cleveland Fed President Sandra Pianalto said yesterday that the Federal Reserve could soon begin reducing the pace of its bond-buying stimulus if recent improvement in the US labor market persists.
Chart. US dollar index (DXY)