The US dollar strengthened to end the trading week, with the greenback maintaining its solid first-half performance as investors seek shelter in the traditional safe-haven asset.
The US Dollar Index (DXY), a measure of the greenback against a weighted basket of currencies, rose 0.05% to 100.94 at 18:16 GMT on Friday, from an opening of 100.91. The index had breached 101.00 during the trading session before paring some of its gains.
The index, which reached its highest level in a year last week, is on track for a weekly gain of 0.1% and is up almost 3% year-to-date.
Investors are poised to resurrect the buck after last year’s abysmal performance. Aggregate net long positions in the U.S. dollar climbed for the eighth consecutive week to almost $40 billion, a decade high.
Despite the upward trend, the dollar is still down from its multi-decade peak from late 2022. But geopolitical tensions and tighter monetary policy expectations could lift the dollar higher heading into 2027.
Because of elevated inflation, investors are pricing in a Federal Reserve interest rate hike as early as the September policy meeting.
But traders will get a fresh batch of inflation data when the June Consumer Price Index (CPI) report is published. The consensus estimate suggests that monthly consumer inflation will fall by 0.1%, and the 12-month rate could slide below 4%.
Minutes from last month’s Federal Open Market Committee (FOMC) meeting suggested that officials believe it is “warranted” to tighten monetary policy.
Participants examined various economic scenarios, looking at an environment of stable employment conditions, elevated inflation, tariff effects, and the Middle East conflict.
“In such scenarios, almost all of these participants indicated that some policy firming would likely be warranted to return inflation to 2 percent,” the minutes state.
“Many other participants, however, assessed that the appropriate level of the federal funds rate would be above the current target range at the end of this year,” the meeting summary stated. “Participants noted that their future policy actions would depend on incoming information.”
The USD/CAD currency pair fell 0.13% to 1.4151, from an opening of 1.4170. The EUR/USD declined 0.13% to 1.1416, from an opening of 1.1431.