The dollar index (DXY00) is down by -0.16% today. The dollar is modestly lower today, consolidating below last Friday’s 2-week high. Today’s rally in the Chinese yuan to a 3.5-year high is undercutting the dollar.
However, losses in the dollar are limited today as WTI crude oil climbs more than +2% to a 1-week high, which raises inflation expectations and could potentially persuade the Fed to raise interest rates, a supportive factor for the dollar. Also, weaker stocks today have boosted some liquidity demand for the dollar, and higher T-note yields have strengthened the dollar’s interest rate differentials. Finally, the dollar has some carryover support from last Friday, when Fed Chair Warsh warned inflation isn’t meaningfully slowing and vowed that policymakers will return inflation to their 2% target. The chance of a Fed rate hike at next month’s FOMC meeting rose to 63% today from 36% before Warsh’s speech.
