US Dollar Index Rebounds Amid US-Iran Uncertainty, Fed Policy Concerns
The US Dollar Index (DXY) staged a modest comeback on Monday, trading around 100 after a stronger-than-expected US manufacturing Purchasing Managers Index (PMI) data and uncertainty over US-Iran talks helped stabilize the Greenback. The DXY had fallen to its weakest level since June 15 at an intraday low of 99.42.
US President Donald Trump's weekend statement that he had called off a planned strike on Iran sparked uncertainty, but Iran denied holding talks with Washington. Trump later accused Iran's leadership of being 'duplicitous' and claimed the US Navy controls the Strait of Hormuz.
The hardline rhetoric from both sides kept defensive demand for the US Dollar alive, despite strategists at Brown Brothers Harriman arguing that 'the USD rally from May has run its course.' They contend the DXY is poised to retreat back into a 96.00-100.00 range due to 'Fed Chair Kevin Warsh's failure to turn tough inflation rhetoric into a credible policy.'
The US ISM Manufacturing PMI rose to 55.6 in July from 53.3 in June, beating the market forecast of 54 and reaching its highest level since May 2022.