
The dollar index (DXY00) today rebounded from a 3-week low and is up by +0.11%. An unexpected increase in today’s US Aug retail sales report sparked short covering in the dollar. Also, today’s stronger-than-expected US Aug manufacturing production report was bullish for the dollar.
The dollar today 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 67% today from 52% last Friday. Strength in stocks today has also reduced liquidity demand for the dollar.