Unexpectedly, the dollar has remained strong this year. Although the US dollar index is still about 10% lower than the 20-year high of14 in September last year, it has risen by about 2% to about 103 since mid-April.
The reason why the dollar is still rising is the result of multiple factors. The analysis pointed out that on the one hand, a series of concerns about the US debt ceiling negotiations, the banking situation and the global economic prospects highlighted the safe-haven status of the US dollar.
On the other hand, at the same time, the pace of the Fed's interest rate hike has not stopped, and the bet on interest rate cuts has also decreased; In addition, the previous technical oversold also pushed the dollar to rebound.
The debt ceiling is worrying.
The red alert day for US debt default is approaching, and the two parties in the United States still have not reached an agreement. The demand for safe haven pushed up the dollar.
The latest news shows that House leaders are expected to vote on the agreement next week, which is the most positive statement made by House Speaker McCarthy on the debt ceiling negotiations so far. However, in the aftermath of the banking crisis, the potential catastrophic threat of US debt default still exists.
Secondly, the banking crisis in March also pushed the dollar to strengthen, and concerns about global economic growth also contributed to safe-haven buying.
When the market faces a series of risks, investors usually choose to buy less risky assets, such as bonds, gold and dollars. As EstherReichelt, a foreign exchange strategist at Commerzbank, said, given the unknown uncertainty, the recent strength of the US dollar is mainly driven by the increase in safe-haven demand.
The possibility of the Fed continuing to raise interest rates still exists.
On the other hand, the Fed has not stopped fighting inflation. As inflation remains stubborn, the market's expectations for interest rate cuts this year have also decreased.
A survey released by the University of Michigan last week showed that consumer inflation expectations rose to a five-year high of 3.2% in May, boosting bond yields and the US dollar.
The latest statement by Fed officials is also hawkish. LorieLogan, president of the Dallas Fed, who has the right to vote at this year's FOMC meeting, said that the reason for suspending interest rate hikes at the FOMC meeting in June is unclear.
On the same day, Federal Reserve Governor Jefferson, who has the permanent right to vote at the FOMC meeting, said that the inflation rate is too high and insufficient progress has been made in reducing the inflation rate. After Logan's speech, traders bet that the probability of the Fed raising interest rates next month will rise to about 40%.
Dollar oversold, technology rebounded.
It cannot be ignored that technical factors are also pushing up the dollar behind the scenes.
The market is betting wildly on the fall of the dollar. According to the data of Commodity Futures Trading Commission, the net short positions of hedge funds and other speculators reached $65.438+0.456 billion last week, which is the largest short position since the middle of 2026.5438+0.
As the dollar rises slightly, some short traders may be forced to buy dollar positions to close their positions, thus pushing up the dollar.