The dollar index (DXY00) today is up slightly by +0.07%. The dollar recovered early losses today and turned higher after St. Louis Fed President Alberto Musalem said he expects the US economy to bounce back next quarter and there’s limited room for additional Fed rate cuts. Also, higher T-note yields today have strengthened the dollar’s interest rate differentials and are supportive of the dollar.
The dollar was under pressure early today on optimism that the US government shutdown is nearing an end after a group of Senate Democrats broke with the rest of their party to vote with Republicans to advance a bill to reopen the government. The reopening of the government would allow the release of economic reports, which may show a weakening US economy, prompting the Fed to keep cutting interest rates. Also, the strength in stocks today has reduced liquidity demand for the dollar.
