- The dollar maintains marginal profits with caution investors to the growing commercial uncertainty.
- The appetite for risk remains moderate since commercial conversations with the European Union and Japan remain stagnant.
- The DXY trades 0.15% above Monday’s minimums, but even 1% below the maximum of last week.
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The US dollar is traded moderately higher compared to its main peers on Thursday, since US Treasury bonds bounce against renewed concerns about global commercial uncertainty. However, it remains well below the maximum of last week.
Negotiations with the European Union and Japan continue, but the comments of the Eurozone negotiators suggest that the growing demands of the US are frustrating the agreement. The block is preparing for retaliation measures, including large anti-coercion measures aimed at services, public tenders and investments in the USA.
As for Japan, the main negotiator, Akazawa, is now in Washington to unlock negotiations, but the agreement remains elusive. Trump increased the pressure on Monday, complaining about the low sales of American cars and rice produced in the US in Japan, and Treaso Besent secretary said he focuses on the quality of the agreements, more than over time.
In this context, caution prevails, and the main currency crosses are negotiated within the previous ranges. The DXY, which measures the US dollar compared to the most negotiated currencies, is quoted about 97.50, after having bounced at 97.25 on Monday, but approximately 1% below the maximums last week at 98.50.
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.
