Greenback Gains on Increased Policy Divergence

US dollar index is higher today, thanks in large part to the policy divergence that the greenback has with its counterparts. US dollar is gaining ground against other majors as expectations for higher rates provide support.

Even though the US economy has been recovering in fits and starts, overall progress has been shown, and it appears to be picking up the pace. This is in contrast to other economic regions, which seem to be stagnating and struggling.
As a result, some expect the Federal Reserve to raise interest rates relatively soon — at least compared to other policy moves by major economies. Since the greenback is expected to be supported by higher rates before other currencies are, gains for the US dollar are already being priced into the Forex market.
For now, the US dollar is mostly higher against its major counterparts, and the dollar index continues to show strength. There might be some consolidation in the near term to bring the dollar in check, but the greenback is expected maintain some level of strength in the medium to long term.
At 12:33 GMT the US dollar index is up to 85.4360 from the open at 85.0980. EUR/USD is down to 1.2723 from the open at 1.2780. GBP/USD is down to 1.6296 from the open at 1.6340. USD/JPY is up to 109.2080 from the open at 109.0425.

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