Dollar Takes Breather After Year-to-Date Advance

The Dollar index has posted a 2.84 percent year-to-date gain through February 14, having recorded just one full-week’s decline so far in 2020.

With its 14-day RSI having tipped into overbought territory, the DXY’s upward momentum is set to wane over the near-term, perhaps allowing currencies across the emerging-markets and G10 spectrum some measure of relief. However, considering the still-cautious mood in the markets stemming from the Covid-19 outbreak, the Greenback should remain well bid in the interim.

Fed’s policy bias in focus

Investors will be combing through the minutes from late-January FOMC meeting on Wednesday in ascertaining whether the Dollar deserves to be pushed even higher over the coming days. Although the Fed funds futures are now pricing in at least one Fed rate hike in the second half of the year, should the Covid-19 outbreak feed negatively into the US economy, that could prompt the US central bank to cut rates sooner than unexpected.

Such a scenario though appears unlikely at this point in time, considering the resilience of the world’s largest economy. Retail sales in the US grew for four consecutive months in January, indicating that US consumers can be relied on to keep US economic growth momentum chugging along.

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