- The American dollar index loses land about 97.30 in Thursday’s Asian session, lowering 0.17% in the day.
- Fed officials are divided between concerns about inflation promoted by tariffs and signs of weakness in the labor market and economic strength, according to the Fed Proceedings.
- The weekly data of initial applications for US unemployment subsidy will be the culminating point later on Thursday.
The US dollar index (DXY), an index of the value of the US dollar (USD) measured against a basket of six world currencies, goes from about a maximum of two weeks to 97.30 in the middle of tariff threats after US President Donald Trump revealed a new round of tariff demand cards.
Trump said Wednesday that he will impose a 50% tariff rate to Brazil, one of the highest announced so far for the levies, which will enter into force in August. He also mentioned that he will apply a 30% tariff to Algeria, Libya, Iraq and Sri Lanka, 25% to Brunéi and Moldova, and 20% to the Philippines products.
In addition, Trump said Wednesday that the new 50% tariff on the copper imports of the US, which he had announced the previous day, will enter into force on August 1, according to Reuters. The decision was made after receiving a national security evaluation. Uncertainty about tariff policies and the impact of tariffs on the US economy could weigh on the dollar in the short term.
According to the minutes of the meeting of June 17-18 of the Federal Reserve (FED), few officials expressed the opinion that interest rates could decrease as soon as this month, while the majority of those responsible for the policy continued to have concerns about inflationary pressures early for the implementation of Trump import taxes, aimed at altering global trade.
The majority of the participants in the Fed meeting saw a reduction in the FED fund rate this year as appropriate, citing that any pricing clash for tariffs was expected to be “temporary or modest.”
Later on Thursday, the operators will be attentive to the publication of the weekly data of initial applications for US unemployment subsidy. If the report shows a stronger result than expected, this could help limit the losses of the USD in the short term. Apart from this, Fed officials are scheduled to speak later on the same day, including Alberto Musalem, Christopher Waller and Mary Daly.
US Dollar – Frequently Questions
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
