U.S Dollar Shows Stability Amid Fed Decision

The US Dollar Index which compares the value strength of the USD against a basket of major currencies showed stability at the last trading session of the week.

The US Dollar Index settled above 106.6 index points. Price action affirmed The DXY maintained its above-key levels on Friday despite a range of opinions and conjecture regarding the Fed’s next course of action.

Wall Street projects the U.S. central bank will deliver a 25 bps trim when it meets next week. Investors hope Chairman Jerome Powell shows signs of what 2025 may bring. Slowing rate cuts are still on the table, given the upcoming Republican presidency and data showing inflation ticking higher in the past few months.

The DXY appears to have recovered some ground as shown on RSI and MACD, but it might encounter resistance in the area of 107.00–107.50. The dollar index might likely retest the 107.00 level but momentum seems to be waning, which might limit further short-term upside.

Early this week the greenback faced some pressure following sharp rallies against numerous major G20 currencies. This retreat comes after fresh data on China’s economy and more information about the stimulus plan the Chinese government is implementing were made public.

The fact that markets are essentially pricing in a cut in the Fed’s decision next week, is offset by rising US Treasury yields, which appear to be giving the US dollar some traction.

U. S. Donald Trump, the president-elect, recently cautioned the BRICS nations that if they try to replace the “mighty U. S. dollar,” they’d have to deal with “100% tariffs and should anticipate saying goodbye to selling into the U.S. economy.

Trump’s statement came after his advisors urged him to take strong action against nations attempting to weaken the dollar’s “supremacy” and threaten the “U.S. worldwide leadership. “

Even though the dollar’s hegemony has diminished and there has been a recent worldwide drop in the preference for the greenback, it is still “by far the most widely used currency by some metrics” and probably will be.  59 percent of global central bank reserves are still in dollars, compared to 72 percent following World War II.

Olumide Adesina

Financial Market Writer

Olumide Adesina is a French-born Nigerian financial writer. He tracks, analyzes, and reports changes in financial markets with over 15 years of working experience in investment trading.