Dollar Index Hits 101.23 as US PMI Data Strengthens Rate Outlook
The US Dollar Index reaches an eight-week high of 101.23. Strong September PMI data and rising oil prices drive the move.
Key points
- The US Dollar Index hit an eight-week high of 101.23 driven by strong September PMI data.
- US business activity output grew at the fastest rate for over five years in September.
- The Relative Strength Index at 71.01 suggests the dollar is in overbought territory.
The US Dollar Index holds gains near 101.00 against six major currencies. The index reached an eight-week high of 101.23 on Wednesday. This move reflects strong US growth data released in September. The dollar strengthened against the Australian Dollar by 1.17 percent this week. FXStreet reports the Greenback maintained these levels during Asian trade on Thursday.
US Economic Data Drives Currency Strength
US PMI figures showed robust manufacturing and service sector activity. Output grew at the fastest rate for over five years. S&P Global expects annualized growth of around 5 percent. The third quarter is set to see a 4 percent gain. These numbers support the Federal Reserve’s higher-for-longer interest rate stance.
Strong demand and higher energy prices fuel inflationary pressures. Fed policymakers noted that not just oil, but broad demand drives costs. Persistent inflation risks make the dollar more attractive to investors. The currency outperformed the Euro, which lost 0.91 percent against it. The British Pound fell 1.13 percent against the Greenback this week.
Oil Prices Reinforce Inflation Concerns
Oil prices recovered sharply after Iranian President Masoud Pezeshkian made a speech. He stated the Islamic Republic will not surrender to the US. This geopolitical tension pushed energy costs higher. Rising oil prices directly impact consumer spending and production costs. The market interprets this as a signal for sustained inflation.
Technical Indicators Signal Potential Correction
The Dollar Index Spot trades at 101.10 on the daily chart. It sits above the 20-period exponential moving average at 99.98. This level acts as underlying trend support for the bullish bias. However, the Relative Strength Index at 71.01 indicates overbought territory. This suggests the upside is stretched and a corrective pause is likely.
Initial support remains at the 20-day EMA around 99.98. A pullback here could find buyers to defend the constructive tone. A daily close below 99.98 would undermine the current bullish bias. Such a drop hints at a deeper retracement in the currency pair. Traders watch this level closely for direction changes.
