Weekly Forex insights: US Dollar continues its upward trend

The US Dollar has experienced a significant rise, achieving its third consecutive week of gains. This upward trend is largely driven by talks of a potential smaller rate cut in November, ongoing geopolitical tensions, and robust economic fundamentals.

Image Credit: Shutterstock

The US Dollar has been on a notable upswing, marking its third consecutive week of gains, primarily fueled by discussions surrounding a potential smaller rate cut in November, persistent geopolitical tensions, and solid economic fundamentals. The Dollar Index (DXY) made significant strides, briefly touching the 200-day Simple Moving Average at around 103.80, reflecting increased investor confidence in the dollar’s resilience.

This week is poised to be crucial, with several important economic indicators set to be released, including the Conference Board (CB) Leading Index, the Richmond Fed Manufacturing Index, and various housing market reports. Each of these metrics will provide insights into the health of the US economy and may influence the Federal Reserve’s decision-making regarding future interest rate adjustments.

The Euro has remained under pressure, with the EURUSD pair hovering near the critical support level of 1.0800. Market participants will be closely monitoring Germany’s Producer Prices and upcoming reports from the European Central Bank (ECB) to gauge the eurozone’s economic landscape and its impact on the euro’s strength.

Meanwhile, the British Pound has faced its own set of challenges, dipping below the 1.3000 mark against the dollar. Key upcoming data, such as Public Sector Net Borrowing and consumer confidence figures, will be instrumental in determining the pound’s trajectory in the coming days.

The USDJPY pair has shown volatility, nearing the significant 150.00 threshold. With Japan’s inflation figures on the horizon, the market’s response could further dictate the yen’s performance against the dollar.

In India, the USDINR pair recently hit a new all-time high of 84.08, before settling into a narrow trading range. The dollar index rose by 0.53% to close at 103.46, propelled by diminishing expectations for aggressive rate cuts from the Federal Reserve. Recent data indicates robust US economic growth coupled with persistent inflation, prompting several Fed officials to support a modest 25 basis point cut rather than a more significant 50 basis point reduction. The market is now pricing in a 90% likelihood of a smaller rate cut.

Domestically, India’s inflation for October was reported at 5.49%, surpassing expectations, while foreign investors have withdrawn $8.4 billion from Indian equities this month, marking the largest monthly outflow since 2002. Additionally, a notable decline in India’s forex reserves highlights the central bank’s ongoing efforts to stabilize the rupee amidst the dollar’s strength.

As the Federal Reserve signals potential smaller rate cuts, the US dollar’s strength may continue, putting further pressure on the Indian rupee and other currencies worldwide.