Does the Rising US Dollar Index Signify an Upcoming Trend Reversal and Domino Effect?


Nov. 20 2020, Updated 4:50 p.m. ET

US dollar index staging reversal ahead of Fed

The US dollar (UUP) index, which measures the strength of the US dollar against a basket of major currencies, was trading higher on June 9, 2016. The index ended a three-day losing streak as the currency pair rose by 0.38% to a high of 94.13.

Meanwhile, the US dollar traded higher than all major currency pairs except the New Zealand dollar, which is still reacting to the Reserve Bank of New Zealand’s (RBNZ) monetary policy release on June 8.

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The rise of the US dollar index ahead of the US Federal Reserve’s meeting on June 14 is an indication to currency investors reacting to bets on a possible rate hike. Investors were slightly helped by US unemployment claims, which came in lower than expected. But although the rate hike seems like a distant possibility now, given the previous week’s dismal non-farm payrolls release, investors are betting on a hawkish outlook from the Fed on June 14.

The best performer for the day

Major Asian (AAXJ) currencies were trading lower against the US dollar on June 9, 2016. The fall was led by the Australian dollar (FXA), which slipped after a three-day gaining streak. The currency pair fell by 0.76% for the day. The other Oceania currency, the New Zealand dollar, continued its strong run on the same day, posting gains against all other major currencies as markets continued to react to the RBNZ’s change in stance.

Euro falls despite strong data

European currencies (FEZ), which form a major part of the US dollar index, was trading on a negative bias against the US dollar. The euro-to-dollar currency pair (EUO) fell by 0.74% despite the positive data release from Germany, with trade balance coming out better than expected.

However, the dollar-ruble currency pair, which is inversely related to the US dollar, fell by a significant 1.1% as crude prices corrected by 1.0% following the recent rally.


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