The US Dollar Index (DXY), which tracks the performance of the greenback against a basket of six major currencies, edged higher on Thursday, hovering around the 99.00 level during the Asian session after recovering losses from the previous day.
The dollar found support following remarks from US President Donald Trump, who said late Wednesday that he expects to reach several agreements with Chinese President Xi Jinping during their upcoming meeting in South Korea next week. The talks between Trump and Xi are anticipated to address a range of key issues, including US soybean exports, nuclear arms control, and China’s purchases of Russian oil.
However, sentiment remains cautious after Reuters reported that the Trump administration is weighing a broad plan to restrict exports to China of products developed or manufactured using US software. The potential restrictions could impact a wide range of goods—from laptops to jet engines—in response to Beijing’s recent curbs on rare earth exports.
The greenback’s gains may face headwinds amid the prolonged US government shutdown, which has delayed the release of crucial economic data such as Nonfarm Payrolls (NFP). The lack of data is fueling uncertainty in financial markets and complicating the Federal Reserve’s (Fed) policy outlook.
According to the CME FedWatch Tool, markets are now pricing in a 97% probability of a Fed rate cut in October, with an additional 96% chance of another reduction in December.
A Reuters poll of economists showed that 115 out of 117 respondents expect the Fed to lower interest rates by 25 basis points (bps) to a range of 3.75%-4.00% at its upcoming policy meeting on October 29. For the full year, 83 economists anticipate two rate cuts, while 32 expect just one.
