US dollar index is heading higher today, gaining ground as policy divergence becomes more of an issue, especially with the euro. Since the euro is the currency with the heaviest weight in the dollar index basket of currencies, it’s no surprise that the index is doing well.
The US dollar continues to benefit from a combination of expectations that the Federal Reserve will have to raise rates at some point and the fact that policy divergence means that other currencies won’t see the same tightening.
Indeed, the dollar is higher against the euro after a disappointing ZEW, while the sterling remains strong against the greenback as good economic news continues to come in for the United Kingdom. There is a bit of risk aversion in the markets as well, with concern about the geopolitical situation, as well as fresh worries that stocks are in a bubble.
For now, all signs point to a stronger dollar index, although that could change quite quickly.
At 13:37 GMT the dollar index is up 80.2070 from the open at 80.1690. EUR/USD is down to 1.3603 from the open at 1.3619. GBP/USD is higher, moving up to 1.7166 from the open at 1.7084. USD/JPY is gaining, moving up to 101.6180 from the open at 101.5385.
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