On Tuesday, the U.S. dollar maintained its robust stance, hovering near a pinnacle not seen in 4-1/2 months against major currencies. This surge was fueled by a retreat in speculations regarding the Federal Reserve’s anticipated interest rate cut, a development that prompted traders to recalibrate their expectations.
The dollar’s momentum gained traction on the heels of unexpected positive news from the U.S. manufacturing sector, which saw its first expansion since September 2022, as revealed by data from Monday. This surprising uptick in economic activity propelled the dollar to a renewed six-week high against the euro and positioned it on the brink of achieving a similar milestone against the British pound.
However, despite the dollar’s ascendancy, apprehensions regarding potential intervention from Japanese officials slowed its advances against the Japanese yen. This caution persisted even as long-term U.S. Treasury yields, which typically influence the currency pair’s movements, surged to a two-week zenith overnight.
Richard Franulovich, head of currency strategy at Westpac, underscored the resilience exhibited by the dollar in contrast to the sluggish performance of other major currencies. He suggested that any downward movements in the Dollar Index (DXY) should be perceived as opportunities for investors to purchase, noting plausible targets around 106 for the DXY, with support levels identified at 104.50.
The Dollar Index eked out a modest 0.05% gain to reach 105.05, mirroring Monday’s peak of 105.07. Concurrently, the euro experienced a marginal 0.08% decline to $1.07335, while the British pound edged down by 0.04% to $1.25455. The Japanese yen, despite exhibiting slight strength, hovered close to its weakest levels since plummeting to a 34-year low last Wednesday, raising concerns about potential intervention by Japanese authorities.
In China, the yuan depreciated to a 4-1/2-month low against the dollar, reaching 7.2349 per dollar. In the Asia-Pacific region, other currencies, including the Australian and New Zealand dollars, remained subdued. Meanwhile, spot gold saw a marginal uptick, rising to $2,255.27 after retracting from its record high in the preceding session.
Elsewhere, the cryptocurrency bitcoin witnessed a 4.4% decline to $69,707, following a sudden downturn attributed to market activity coinciding with the commencement of trading in China. This occurrence underscored China’s influence as a significant factor driving intraday movements in financial markets.