US Dollar Index off 2025’s low, set to close February off with a big monthly loss – Crypto News – Crypto News
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US Dollar fights back despite soft data US Dollar fights back despite soft data

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US Dollar Index off 2025’s low, set to close February off with a big monthly loss – Crypto News

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  • The US Dollar is able to show a small recovery on Wednesday.
  • Markets see rate cut bets by the Fed  increase with Tump’s tariffs set to kick in at the start of March.
  • The US Dollar Index (DXY) resides near yearly lows, looking for a bounce. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, orbits around 106.50 at the time of writing on Wednesday, set to close off February at the lowest point of 2025. The DXY Index holds near yearly lows as traders shun the Greenback in a flight to safe havens from United States (US) President Donald Trump’s tariffs, which are set to kick in on March 4 for Mexico, Canada, and China. 

Meanwhile, traders are seeing a second element of a weaker greenback. For the first time this year, Federal Reserve (Fed) rate cut bets are pricing in two rate cuts for 2025. The move comes as the interest rate gap between US yields and other countries narrowed, triggering a weaker US Dollar overall. It comes just days before the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) data, which will be released on Friday. 

Daily digest market movers: Volatility surge

  • At 14:00 GMT, US President Donald Trump will be speaking with the media.
  • At 15:00 GMT, New Home Sales are expected to slow down to 0.68 million units for January compared to the 0.698 million units a month earlier. 
  • At 17:00 GMT, President of the Federal Reserve Bank of Atlanta Raphael Bostic participates in a moderated discussion at the Urban Land Institute in Atlanta.
  • At 18:00 GMT, Federal Reserve Bank of Richmond President Thomas Barkin delivers a speech, “Inflation Then and Now”, at the Northern Virginia Chamber of Commerce, Arlington.
  • Equities are brushing off the negative tone from Tuesday and are up across the board on Wednesday. 
  • The CME FedWatch tool shows an uptick in chances for an interest rate cut by the Federal Reserve (Fed) in June, backed by the drop in US yields this Wednesday. Currently, the tool projects a 66.2% chance of interest rates being lower than current levels compared to 33.8% for no rate cut
  • The US 10-year yield trades around 4.30%, further down from last week’s high at 4.574%.

US Dollar Index Technical Analysis: Trump wants yields lower

Lower US Yields drive theUS Dollar Index (DXY) into the ground. The dive in US yields only picked up speed after US Treasury Secretary Scott Bessent said on Tuesday that US rates would come down anyway, even without the Fed. Expect to see the DXY dive lower to the long-awaited 106.00 barrier. 

On the upside, the DXY index is trying to recover the 106.52 (April 16, 2024, high) level on Wednesday after breaking and closing below it the prior day. Further up, the 100-day Simple Moving Average (SMA) could limit bulls buying the Greenback near 106.71. From there, the next leg could go up to 107.35, a pivotal support from December 2024 and January 2025. In case US yields recover and head higher again, even 107.96 (55-day SMA) could be tested. 

On the downside, if the DXY cannot recover the 106.52 level, another leg lower might be needed to entice those Dollar bulls to reenter near 105.89 or even 105.33.

US Dollar Index: Daily Chart

Tariffs FAQs

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

 

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