US Dollar Index (DXY) hangs near multi-month low, seems vulnerable above mid-103.00s
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USD meets with a fresh supply amid worries about a tariff-driven slowdown in US growth.
Bets that the Fed will resume its rate-cutting cycle sooner further weigh on the Greenback.
The recent rally in the Euro and the JPY contributes to the strong USD bearish sentiment.
The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on the previous day's modest gains and attracts fresh sellers during the Asian session on Tuesday. The index currently trades around the 103.70 area, down over 0.20% for the day, and remains close to its lowest level since early November touched last Friday.
Investors remain worried about US President Donald Trump's trade tariffs and their potential impact on the US economy. Apart from this, Friday's weaker US Nonfarm Payrolls (NFP) report pointed to signs of a cooling labor market. This continues to fuel speculations that the Federal Reserve (Fed) would cut interest rates multiple times this year, which keeps the US Treasury bond yields depressed and is seen undermining the US Dollar (USD).
Apart from this, the recent rally in the shared currency, led by a historic deal to loosen Germany’s borrowing limits, and the Japanese Yen (JPY), bolstered by bets for more interest rate hikes by the Bank of Japan (BoJ), further weigh on the Greenback. However, the prevalent risk-off environment could offer some support to the safe-haven buck. Traders might also refrain from placing aggressive bets ahead of the latest US inflation figures.
The crucial US Consumer Price Index (CPI) report is due for release on Wednesday and will be followed by the US Producer Price Index (PPI) on Thursday. This might influence market expectations about the Fed's rate-cut path, which, in turn, will play a key role in driving the near-term USD price dynamics. In the meantime, traders on Tuesday will take cues from the Job Openings and Labor Turnover Survey (JOLTS) for short-term impetuses.
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