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Why Did the US Dollar Index Continue to Fall?

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Aug. 18 2020, Updated 9:26 a.m. ET

US Dollar Index fell by 0.75%

The US Dollar Index measures the strength of the dollar against other major currencies. It continued its downward trajectory on February 4, 2016. The US Dollar Index fell by close to 0.75% for the day. The US Dollar Index fell to a low of 96.27 before ending the day at 96.56. The fall was primarily due to weak domestic data and diminishing sentiments regarding the Fed’s rate hike after the dovish comments by New York Fed President William Dudley.

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Weak domestic data weighed down the US Dollar Index

The U.S. Department of Labor published the unemployment claims for the week ending January 30, 2016, on February 4, 2016. The claims rose by 8,000—compared to the previous month. It came out at 283,000. On the same day, the Census Bureau published the month-over-month factory order. It also came out on a disappointing note. Factory orders fell by 2.9% in December. This was was a sharp decline compared to the previous month’s fall of 0.7%.

Impact on the market

Regarding ETFs, the PowerShares DB US Dollar Index Bullish ETF (UUP) fell by 0.67% on February 4, 2016. The WisdomTree Bloomberg US Dollar Bullish ETF (USDU) encompasses developed economies and emerging market currencies. It followed a similar trajectory and fell by 0.44%. ETFs like the United States Oil Fund (USO) fell by 2.4%. It’s related more to the crude oil sector.

US stocks were on a positive trajectory on February 4, 2016. Lennar (LEN) and Toll Brothers (TOL) rose by 0.40% and 2.0%, respectively. Crude oil-related stock ExxonMobil (XOM) rose by 1.7%. Banking-related stocks followed a contrasting pattern. Bank of America (BAC) rose by 1.7%.

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