The dollar index (DXY00) this morning is down by -0.17%. The dollar gave up an overnight rally and turned moderately lower. The dollar spiked higher in overnight trade after US officials said Israel launched a retaliatory air strike against Iran in response to Iran’s rocket and drone attack on Israel last weekend. However, the dollar gave up its gains and turned lower on signs the damage was minimal, and an Iranian military official downplayed the attack. Lower T-note yields today are also weighing on the dollar.
Losses in the dollar are limited as Fed rate-cut expectations have dropped sharply due to recent strength in US economic news and hawkish Fed comments. Swap markets are discounting the chance of a Fed rate cut at the June FOMC meeting at 19%, much less than the 66% chance the market had priced in earlier this month.
