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>>U.S. Dollar Index Defies Gravity, Climbing Toward 98 Amid Escalating Trade Friction

U.S. Dollar Index Defies Gravity, Climbing Toward 98 Amid Escalating Trade Friction

crypthub

about 13 hours ago

Dollar Index Momentum

The US Dollar Index (DXY) has risen about 4.2% year‑to‑date, closing in on the 98.00 level unseen since late 2023. This advance comes amid heightened global trade tensions that usually weaken reserve currencies. Traders are re‑examining traditional market correlations as the dollar shows unexpected resilience.

Policy Divergence and Yield Advantage

The Federal Reserve’s data‑driven stance and higher‑than‑average rates give the dollar a yield edge over the euro, yen and pound. The ECB and BOJ signal more dovish policies, widening interest‑rate differentials. Institutional investors are moving into US Treasuries for liquidity and safety.

Trade Tensions vs Safe‑Haven Demand

New tariffs and export limits have disrupted supply chains, yet the dollar’s role as the primary invoicing currency sustains demand. During stress, capital flees emerging‑market and risk assets, reinforcing the dollar’s safe‑haven appeal. Net long positions on the dollar have risen for five consecutive weeks, indicating growing conviction.

Outlook and Risks

Key drivers ahead include U.S. inflation data, any easing of trade disputes, and surprise policy moves from the ECB or BOJ. A confirmed close above 98.00 could target the psychological 100 barrier, while failure may trigger consolidation. The dollar’s strength will depend on the balance between monetary‑policy tightness and global geopolitical developments.