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US Dollar Index Follows Yields Higher To Reclaim The Monthly High Before To Fed Chair Powell's Speech
After a three-day advance, the US Dollar Index grinds near a one-month high as bulls take a breather. US President Biden and Treasury Secretary Yellen pushed back recession concerns and preferred a hawkish bias over the Federal Reserve, sustaining the DXY's ascent. The absence of an escalation in U.S.-China tensions and a cautious atmosphere preceding Fed Chair Powell's speech influence dollar buyers. Powell must applaud the latest strengthening of US data in order to maintain the US Dollar Index bullish.
The US Dollar Index (DXY) rises to 103.60 as buyers stretch their muscles ahead of Federal Reserve (Fed) Chairman Jerome Powell's important speech. In doing so, the dollar's indicator versus the six main currencies tracks positive US Treasury bond rates and hawkish Fed fears to keep DXY bulls optimistic.
However, words from US Treasury Secretary Janet Yellen and President Biden assist DXY bulls by delaying recession concerns and supporting hawkish wagers on the Fed's upcoming steps. In their respective addresses, though, both policymakers downplayed the likelihood of a U.S. recession. The dollar was also supported by a continuous increase in US Treasury bond yields and a decline in equities, as traders renewed their hawkish bets on the Fed in response to positive US data.
Notably, last week's encouraging US job, wage, and activity data rekindled optimism that the Fed still has some work to do before it can welcome rate hawks and policy dovs.
The recent discussions regarding Sino-American ties, particularly after the US shot down a Chinese balloon and postponed a diplomatic visit to Beijing, provided additional support for the DXY bulls the previous day, with the fading recession fears and buoyant US data-driven hawkish Fed bias. The most recent remarks by US President Joe Biden appear to be reassuring, as he stated, "The balloon incident does not harm US-China ties."
Wall Street closed in the red as US 10-year Treasury bond yields extended last Friday's bounce, allowing the DXY to advance for a third straight day.
Aside from Fed Chair Jerome Powell's speech and US President Joe Biden's State of the Union (SOTU) remarks, the US Dollar Index may experience a sideways movement in the near future. If Powell chooses to praise recent economic developments in the United States and repeat his hawkish stance on monetary policy, the DXY might track further gains.
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