Dollar Index Approaches 15-Month High

The US dollar index rose to 101.3 on Wednesday, easing from the 15-month high of 101.6 earlier in the session after Fed Chairman Warsh said that inflationary risks are lower. The remark was aligned with a reduction in the ISM Manufacturing prices gauge, aided by the pullback in energy prices, and taming the risk of multiple Fed rate hikes this year Still, a majority of the market continued to expect some level of tightening. Data aggregated by the ADP indicated that the US private sector added nearly 100,000 jobs in June, slightly under market expectations but firmly above the average this year to maintain leeway for the Fed to restrict monetary policy. The dollar was also supported by Warsh's campaign to reduce the central bank's balance sheet, limiting the supply of dollars and playing a part in the unwinding of the dollar debasement trade from earlier in the year. Lastly, bets of ECB hikes eased amid softer inflation in the bloc, while a fiscally-dovish Japan pressured the yen.

The US dollar index rose toward 101.6 on Wednesday, testing its highest in 15 months as the outlook of a hawkish Federal Reserve was combined with weakness in major G10 currencies. A majority of the market continued to expect at least one rate hike by the Fed this year amid evidence of a robust labor market and increasing core inflation. Data aggregated by the ADP indicated that the US private sector added 98,000 jobs in June, slightly under market expectations but firmly above the average this year to maintain leeway for the Fed to restrict monetary policy further. The dollar was also supported by Fed Chair Warsh's campaign to reduce the central bank's balance sheet, limiting the supply of dollars and playing a part in the unwinding of the dollar debasement trade from earlier in the year. Lastly, bets of multiple ECB hikes this year were tempered by soft Eurozone inflation, while a fiscally-dovish Japan pressured the yen.

The dollar index rose to around 101.3 on Wednesday, recouping losses from earlier in the week as investors looked ahead to the latest US monthly jobs report for fresh insights into the strength of the labor market and the outlook for Federal Reserve policy. The greenback also drew support from higher Treasury yields, with the benchmark 10-year yield climbing about 10 basis points in the previous session. Data released on Tuesday showed US job openings rose to a two-year high in May, indicating labor demand remained resilient despite signs of softer hiring. Markets are now pricing in at least one Fed rate hike this year, with the first potentially coming as early as September. Meanwhile, investors continued to monitor the ongoing US-Iran peace talks in Qatar amid hopes for a lasting ceasefire agreement, although the two sides were not expected to hold direct talks.