DXY: Dollar Index Expected to End Another Week in the Red as Rate Hikes Weigh on Optimism

The U.S. dollar has been under increasing pressure on multiple fronts, both domestically and internationally.

The dollar index, DXY, is expected to close another week in the red. An attempt to charge higher early in the week failed after the Federal Reserve raised interest rates on Wednesday but pledged to stop tightening policy for the remainder of 2023. No rate increases eliminates the possibility of higher returns on the dollar.

Against this background, the dollar index is on course to record its eighth consecutive week of losses in the last ten. The decline has resulted in a devaluation of just under 5 percent relative to a basket of other main currencies. From September of last year to the present, the DXY has declined from a 20-year high of 114.80 to 101.10.

On Friday morning, dollar-pegged currency pairs acquired additional traction. The EUR/USD regained the $1.1050 threshold after a 25 bps cut by the European Central Bank yesterday temporarily weakened the euro. The GBP/USD is aiming to surpass $1.2670, its highest level in a year.