Cautious Optimism For Dollar’s Future

Though analysts’ forecasts are practically unanimous in calling for a Federal Reserve rate hike in the coming days markets remain cautiously nervous of a surprise. As a result, the US Dollar Index slipped to a 7-week trough and kept the greenback under broad pressure. The Fed chairman, Janet Yellen, has been promising a rate hike for several months now and many believe that, in order to “save face” she and the FOMC will push through a 25 basis points rate hike. However, the concern is that the appreciating dollar could weigh heavily on the future economy of the US, given the likely disparity in policies between the Fed and the rest of the world’s central banks.

As reported at 10:43 am (GMT) in London, the US Dollar Index was trading at 97.347 .DXY, down 0.26%. The EUR/USD was 0.18% higher at $1.022 while the GBP/USD was down 0.13% at $1.5153. The AUD/USD was higher at $0.7261, a gain of 0.14% while the NZD/USD was 0.52% higher at $0.6799.

2016 Dollar Outlook Still Uncertain

Analysts feel that the US Dollar remains vulnerable to a Fed surprise. The surprise could come with a less than robust outlook which might mean that future rate hikes could be fewer and far between. At present, the Fed has signaled that there might be as many as four additional rate hikes in 2016, but a more dovish stance could mean a more gradual tightening.