Why the US Dollar Index Fell after Its Initial Uptick



US dollar index falls from initial highs

The US markets opened on a mixed note on February 24, 2016, as the S&P 500 Futures Index rose by 0.05% after an initial fall. NASDAQ futures rose by 0.42%, and the Dow Jones Industrial Average fell by 0.18%.

The US Dollar Index, which measures the strength of the US dollar against other major currencies, rose to a high of 97.9 in early trading before falling on weak data. The US Dollar Index was trading flat as of 1:30 PM EST.

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Weak PMI and home sales weigh down the dollar

The Markit flash services PMI (purchasing managers’ index) for February 2016 came in below forecasts at 49.8. The below-50 value indicated a contraction in the service sector. New home sales also came out on a negative note at 494, 000 against forecasts of 522,000.

The major data for the day came in later as crude oil inventories rose by 3.5 million barrels. This caused crude oil’s price to rise, as the rise in inventories was below the API’s (American Petroleum Institute) estimates from earlier in the week.

Impact on the market

Looking at the performance of the major ETFs, the SPDR S&P 500 ETF (SPY) fell by 0.54% on February 24, 2016, at 1:30 PM EST after the weak PMI data was released. The SPDR Dow Jones Industrial Average ETF (DIA) fell by 0.73%.

The SPDR S&P Homebuilders ETF’s (XHB) losses were less compounded. The fund fell by 0.1% after weak new home sales data. Currency-related ETFs the WisdomTree Bloomberg US Dollar Bullish ETF (USDU) and the PowerShares DB US Dollar Bullish ETF (UUP) were seen following the dollar as they returned to their opening levels after initial movements.

While the crude oil–related United States Oil ETF (USO) rose by 1.0%, the ProShares Ultra Bloomberg Crude Oil ETF (UCO) rose by 2.4% in early trading on February 24, 2016.

The Energy Select Sector SPDR ETF (XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) rose by 1.0% and 2.0%, respectively.


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