U.S Dollar Rampaging Near A Year High

As expectations mount that the Federal Reserve will taper stimulus from November, the safe-haven currency rallied near a one-year high against major peers, while the iron ore price surge benefited the commodity-linked Aussie dollar.

In the last two sessions, the greenback has gained sharply on fears that Fed support could be withdrawn as global growth slows and inflation is high. Rising bond yields also contributed to the currency’s strength.

The yield on the benchmark 10-year Treasury note was 1.5341%, near a mid-June high of 1.5670% reached Tuesday.

A U.S. debt ceiling impasse that threatens to shut down the government is not preventing its rise.

The dollar index, which measures currency strength against a basket of six rivals, stood at 94.3, virtually unchanged from yesterday when it hit 94.435 for the first time since late September last year.

During Thursday’s sluggish Asian session, DXY bulls took a breather around the yearly high of 94.40.

A bullish RSI reading of overbought levels on the greenback gauge the previous day challenged rampaging bulls.

It is essential that the pullback moves are validated from the November 2020 peak, located around 94.30, for a break of which will evoke the 94.00 thresholds.

Money markets pricing in rate hikes will likely support the dollar until mid-October when the debt ceiling issue could be resolved or raised.

With the end of the year approaching, corporates and asset management firms typically demand more dollars, like rebalancing portfolios and sending funds to others demands conversion of currencies such as the euro and sterling to dollars.

In addition, the monthly Chinese services data also seems to have allayed fears that China’s evident slowdown of late is speeding up.

DXY bears will be attracted to the August month high near 93.72 and March’s top close to 93.45.