The dollar's uptrend continues for the fourth consecutive session.. What is the reason?

The US dollar index jumped significantly during trading on Thursday, as the greenback broke through its highest level since August 16, and the dollar once again surpassed the 102-point mark.

The rise of the US dollar came on the back of increasing market optimism regarding the US interest rate cut cycle, which may not be as aggressive as expected; as data from the US services purchasing managers' index showed a rise, recording its highest level since February 2023, reaching 54.9 points in September.

This reflects the strength and resilience of the US economy, confirming the recent statements by Federal Reserve Chairman Jerome Powell, which indicated that the pillars of the US economy are solid. This may prompt the Federal Reserve to continue its interest rate reduction cycle, but in a more gradual and cautious manner.

In comparison with the dollar's major currency pairs; it seems that the global interest rate cut cycle may favor the dollar compared to its major currency counterparts, especially after the Bank of England Governor stated that upcoming rate cuts might be more aggressive if inflation weakness continues, noting that living cost pressures are not as persistent as feared by the Bank of England.

In addition to this, the dollar received strong support from its role as a safe-haven currency during times of turmoil and geopolitical volatility; as the situation in the Middle East continues to escalate and strikes in Lebanon are ongoing; also, the White House is currently discussing how to support future US strikes on Iran in response to recent Iranian missile attacks.

The Dollar Now

In terms of currency market trading today, the US dollar index – which measures the performance of the greenback against a basket of six major currencies – jumped by about 0.44% to nearly 102.48 points.