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The dollar index held steady on Wednesday, consolidating after Tuesday’s advance.
US Treasury yields stabilized as well after declining yesterday, limiting the pressure on the currency.
The 10-year is once again testing the 4% threshold, and traders could remain cautious ahead of Friday’s CPI report, which could inject fresh volatility into both bonds and forex markets.
A stronger-than-expected print would likely underpin the dollar, while a soft release could renew easing bets.
While it retreated slightly today against the yen, the greenback could continue to find strength against the Japanese currency if the latter continues to weaken, as investors react to political developments in Tokyo. Markets expect Japan’s new Prime Minister, Sanae Takaichi, to pursue expansionary fiscal policies, a scenario that could maintain the downward trend of the yen.
US-China trade dynamics remain a critical driver. While President Donald Trump reiterated optimism over a deal, he also warned that a meeting with President Xi Jinping could face delays, keeping uncertainty elevated. Meanwhile, hopes that the US government shutdown may be resolved this week could provide additional support, but investors could remain cautious.
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