The US Dollar is showing signs of strength on Wednesday, with strong expectations that the Federal Reserve (Fed) will implement more interest rate hikes this year.
During Asian trading, the US Dollar Index (DXY), which measures the Dollar’s value against six major currencies, rose by 0.15% to around 100.70, marking its highest level in over seven weeks.
US Dollar Price Today
The following table illustrates the percentage changes of the US Dollar (USD) against various major currencies today, where the Dollar is notably stronger against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.16% | 0.20% | 0.13% | 0.12% | 0.19% | 0.42% | 0.09% | |
| EUR | -0.16% | 0.03% | -0.02% | -0.02% | 0.05% | 0.25% | -0.06% | |
| GBP | -0.20% | -0.03% | -0.04% | -0.08% | 0.02% | 0.23% | -0.02% | |
| JPY | -0.13% | 0.02% | 0.04% | -0.02% | 0.02% | 0.28% | 0.00% | |
| CAD | -0.12% | 0.02% | 0.08% | 0.02% | 0.05% | 0.30% | 0.03% | |
| AUD | -0.19% | -0.05% | -0.02% | -0.02% | -0.05% | 0.24% | -0.02% | |
| NZD | -0.42% | -0.25% | -0.23% | -0.28% | -0.30% | -0.24% | -0.26% | |
| CHF | -0.09% | 0.06% | 0.02% | -0.01% | -0.03% | 0.02% | 0.26% |
The heat map illustrates the percentage shifts between major currencies. Here, the left column shows the base currency, while the top row displays the quote currency. For instance, by selecting the US Dollar and navigating horizontally to the Japanese Yen, the percentage change shown represents the USD against the JPY.
According to the CME FedWatch tool, the likelihood of the Fed implementing at least one more interest rate hike this year is nearing 90%.
Recent comments from several Fed officials indicate concerns about rising inflation risks from various factors, reinforcing the Dollar’s strength.
Brown Brothers Harriman’s Elias Haddad comments that Fed officials are emphasizing the possibility of further tightening, which aligns with a positive outlook for the Dollar. They note that St. Louis Fed President Alberto Musalem suggested “further rate hikes may be necessary to control inflation,” while Chicago Fed President Austan Goolsbee pointed out that policy may become “more aggressive and front-loaded” if demand appears to be overheating. This hawkish stance among both current and future FOMC members seems to maintain the belief that more tightening is ahead, which is beneficial for the US growth and yield when compared to the Euro, Pound, and Yen.
Additionally, Richmond Fed Bank President Thomas Barkin stated, “Last week’s rate hike will help restore price stability, and we shall see if additional hikes are required.”
US Dollar Index Technical Analysis
Currently, the Dollar Index Spot stands at 100.70, holding above the 20-day exponential moving average (EMA) of 99.82. This position indicates a bullish outlook in the near term as the price continues to rise from this short-term trend reference. The Relative Strength Index (14) is nearing the overbought level at 67.40, suggesting strong but possibly stretched upward momentum following its recent increase.
On the downside, immediate support appears around the current level of 100.70, with the 20-day EMA at 99.82 reinforcing underlying demand if there’s a pullback. With no significant technical barriers above this range, momentum signals suggest the index might consolidate or slightly correct before pursuing further gains, remaining broadly supported above the 20-day EMA.
US Dollar FAQs
The US Dollar (USD) serves as the official currency of the United States and is widely accepted in many other countries, often circulating alongside local currencies. It is the most traded currency globally, comprising over 88% of all foreign exchange transactions, averaging $6.6 trillion a day as of 2022. Following World War II, the USD replaced the British Pound as the world’s reserve currency. For a significant part of its history, it was backed by gold until the Gold Standard ended in 1971 with the Bretton Woods Agreement.
Monetary policy, determined by the Federal Reserve (Fed), is the most crucial element influencing the value of the US Dollar. The Fed aims for price stability (controlling inflation) and fostering full employment, primarily through adjusting interest rates. If inflation exceeds the 2% target, the Fed is likely to raise rates, boosting the Dollar’s value. Conversely, if inflation drops or unemployment rises, the Fed may cut rates, which typically weakens the Dollar.
In extreme circumstances, the Federal Reserve can print more Dollars and engage in quantitative easing (QE). QE significantly increases credit flow during financial distress when banks become reluctant to lend. It’s a last resort when lowering interest rates isn’t effective, used notably during the Great Financial Crisis of 2008, involving the purchase of US government bonds to facilitate liquidity. QE generally results in a weaker Dollar.
Quantitative tightening (QT) is the process in which the Federal Reserve halts bond purchases and refrains from reinvesting principal amounts from maturing bonds. This typically has a positive impact on the value of the US Dollar.
