Dollar Index Edges Up Amidst Rate Cues, War Cries

(RTTNews) - The U.S. Dollar recorded a mixed performance against major currencies during the week ended July 10 as uncertainty about the Federal Reserve's monetary policy trajectory as well as safe haven demand triggered by the reignited Middle East conflict swayed market sentiment.

During the past week, the U.S. dollar rallied against the euro, the Japanese yen, the Swedish krona and the Swiss franc but slipped against the British pound, the Australian dollar, as well as the Canadian dollar. The 6-currency Dollar Index edged up close to 0.10 percent over the course of the week. Here is a quick recap of the dollar's trajectory during the week ended July 10.

During the week, which witnessed a volatile geopolitical situation in the Middle East as well as the release of FOMC minutes from the U.S., the U.S. dollar recorded mild gains. The Dollar Index, a measure of the Dollar's strength against a basket of 6 currencies ranged between the high of 101.28 recorded on Wednesday and the low of 100.60 recorded on Friday.

Minutes of the June FOMC released on Wednesday afternoon revealed growing concerns about the inflationary situation in the U.S. Participants generally noted that inflation had increased further and remained well above the Committee's 2 percent longer-run objective. They observed that both core and total inflation had moved higher. Participants generally attributed this to the lingering effects of tariffs, Hormuz related supply chain disruptions as well as strength in demand for some goods and services stemming from AI-related investments. Several participants commented that price pressures had become more broad-based.

Amidst the rate cues from the Federal Reserve as well as the war cries from the Middle East, the Dollar Index added 0.09 percent during the week ended July 10. The index which had closed at 100.86 on July 3 finished trading at 100.95 a week later.

The EUR/USD pair dropped 0.20 percent in the past week marked by tensions in the Middle East as well as release of minutes from the European Central Bank's meeting. The minutes revealed the ECB's conviction that inflationary pressures had become too broad and persistent. During the week ended July 10, the EUR/USD pair dropped to 1.1414, from 1.1437 a week earlier. The pair ranged between a weekly low of $1.1391 recorded on Wednesday and a weekly low of $1.1461 on Friday.

The week ended July 10 also witnessed the pound gaining 0.41 percent against the dollar. The sterling, which had closed at $1.3352 on July 3 increased to $1.3407 by July 10 as markets welcomed signs of political stability in the U.K. The GBP/USD pair traded between a low of 1.3321 recorded on Wednesday and a high 1.3453, recorded on Friday. The risk-sensitive Aussie also rallied mildly against the U.S. Dollar during the week ended July 10. The gain for the AUD/USD pair during the week was 0.16 percent, from 0.6941 on July 3 to 0.6952 on July 10. The pair traded between the week's low of 0.6906 recorded on Wednesday and the week's high of 0.6971 on Friday.

The Japanese yen also declined 0.20 percent against the U.S. dollar during the week ended July 10. The USD/JPY pair which had closed at 161.38 on July 3, increased to 161.70 in a week's time. During the week, the pair ranged between the week's high of 162.71 touched on Wednesday and 161.27 on Friday. The yen had strengthened on Friday amidst reports that Japanese pension funds would be investing more in Japanese financial assets.

Sentiment in the currency market remains more or less tethered to the geopolitical situation in the Middle East. Anxiety ahead of Federal Reserve Chair Kevin Warsh's two-day testimony before Congress starting on Tuesday as well as the release of the U.S. inflation readings for June on Tuesday also lingers. The six-currency Dollar Index touched a high of 101.16 earlier in the trade, versus the previous week's high of 101.60. It has since eased to 101.02 versus 100.95 at close on Friday.

With the dollar edging up from the flatline, the euro is trading flat while the pound has declined. The EUR/USD pair is trading flat at 1.1414, the level at close on Friday. The GBP/USD pair has dropped to 1.3380 from 1.3407 at the end of the previous week. The AUD/USD pair which was at 0.6952 at close on Friday has dropped to 0.6938. The USD/JPY pair has rallied, rising to 162.26 from 161.70 at close on Friday.