The dollar index (DXY00) today rebounded from a 3-week low and finished up by +0.15% on signs of US economic strength. An unexpected increase in Tuesday’s US Aug retail sales report sparked short covering in the dollar. Also, Tuesday’s stronger-than-expected US Aug manufacturing production report was bullish for the dollar.
The dollar on Tuesday initially moved lower after the 10-year T-note yield fell to a 15-month low on heightened speculation the Fed will cut the fed funds target range by 50 bp at the Tue/Wed FOMC meeting. Swap markets show that the odds of a 50 bp rate cut rose to 69% Tuesday from 52% last Friday.
