The us dollar index hit a high of 109.27 yesterday, close to the year’s high of 109.29, but weak U.S. housing data and U.S. PMI data prompted it to reverse its decline.
Economists at Mitsubishi UFJ Bank see the dollar’s inversion and decline unlikely to last. The movement of the U.S. dollar index reflects both technicals and fundamentals. The pullback was indeed triggered by weaker-than-expected data, but yesterday’s highs failed to hit this year’s highs, meaning the dollar had weakened ahead of the data.
In this case, weak U.S. data won’t change the dollar’s strength, as it’s not the strength of the U.S. economy that’s driving the greenback, but a grim deterioration in the global growth outlook.
Europe has been hit harder by energy markets, so the dollar is most in demand relative to other currencies.