The U.S dollar index gained slightly against major currencies, on Tuesday morning, as rising commodity currencies paused their bullish momentum, coupled with currency traders awaiting the U.S. Federal Reserve’s next move.
The U.S dollar index gained 0.08% to trade at 96.6980 at 4.30am local time.
The U.S dollar index was supported by last week’s impressive U.S. jobs data for May, catching the financial markets completely off-guard. Also, over the weekend, China’s export data for the month of May was stronger than forecasted.
“Economies are smashed, but not smashed as bad as was expected and I think that’s the key to this whole rally,” Westpac FX analyst Imre Speizer said in a note to Reuters.
The head of global market research at MUFG Bank in Tokyo, Minori Uchida, explained that, “At the moment, hopes for economic recovery are strong, but I expect this to gradually fade to increased concern about the U.S.-China relationship.
“I personally don’t think yield curve control is necessary now, but the dollar is under clear selling pressure.”
Why you should track the U.S dollar Index: Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries like Europe, and Japan, will need to pay less dollars to fulfil such transactions.
The American Dollar Index tracks the U.S dollar strength relatively against a bouquet of other major currencies around the world, such as Japanese yen, Euro, British pounds sterling, Swedish krona, Canadian dollar, Swiss Franc, etc.
However, the World Health Organization recently warned that the COVID-19 pandemic is “far from over,” as a record number of new COVID-19 infections were recorded.
But investors took comfort from cases trending lower in the United States and falling to a fresh low in New York, even as testing has ramped up.
“If we continue to trend lower … this will go a long way in re-aligning consumer risk assessment about the virus,” said RBC Capital Markets’ Chief U.S. Economist, Tom Porcelli.