US Dollar Index News: DXY Surges as Yields Rise on Resilient Jobs Data

Key Points

• Dollar index rises after strong job market indicators.
• Federal Reserve’s cautious stance on rate cuts.
• U.S. Treasury yields propel dollar index gains.

Policy Insights and Market Reaction

The U.S. dollar is trading higher against a basket of currencies on Thursday, although it remained below a 12-week peak reached earlier in the week. This movement followed an analysis of policymakers’ statements from the previous session, which suggested a prolonged period of higher interest rates. Another rise in Treasury yields also underpinned the greenback.

At 14:55 GMT, the U.S. Dollar Index is trading 104.232, up 0.180 or +0.17%.

Impact of Resilient Jobs Data

The 10-year Treasury yield rose to 4.15% after the release of more resilient job data, contributing to the dollar’s upward trajectory. Initial unemployment insurance claims dropped to 218,000, surpassing the Dow Jones estimate of 220,000, indicating businesses’ sustained workforce retention.

Federal Reserve’s Rate Cut Expectations

Investors closely examined recent statements from Federal Reserve officials, indicating fewer anticipated rate cuts in 2024 compared to previous projections. Minneapolis Fed President Neel Kashkari anticipated two or three rate reductions in 2024, while Fed Governor Adriana Kugler emphasized the need for additional data to confirm a sustained decline in inflation.

Market Sentiment

Market sentiment reflects a reduced probability of rate cuts in March, shifting from around 20% earlier in the year to the current estimate. The dollar index, which peaked at 104.60 on Monday, retreated slightly to 104.23 on Thursday, underpinned by strong job data.

Short-Term Forecast

Expectations of higher U.S. Treasury yields in the short term suggest a continued uptrend for the U.S. Dollar Index. However, market participants remain vigilant for insights from several Federal Reserve speakers scheduled to address the market, which could influence near-term sentiment.

Technical Analysis

The US Dollar Index (DXY) is trading higher on Thursday after reversing earlier weakness. If the upside momentum continues then look for buyers to attempt to breakout over the weekly high at 104.604. This would signal a resumption of the rally with traders eyeing 105.628 as the next potential target.

On the downside, solid support is forming at 103.602 to 103.572. This support cluster is a combination of the 200-day moving average and a static support level.