US Dollar Index extends its winning streak as Fed speakers line up behind hikes

The US Dollar Index (DXY) has reclaimed approximately 90% of the losses it sustained between its late-July peak and the August trough. The gauge surged to 101.40 on Thursday, its highest point since the end of July, and is poised for a fourth consecutive increase. On Thursday, three Federal Reserve officials addressed the issue, all expressing a potential need for additional rate hikes.

Despite the Fed's recent rate increase to 3.75-4.00% on September 16, which influenced the futures market, none of the officials explicitly indicated their distance from the next move. New York Fed President James Bullard suggested a potential further increase this year, while Cleveland Fed President Thomas Hoenig warned that prolonged inflation above target would make rate adjustments more challenging and costly.

Philadelphia Fed President Stanley Fischer, voting this year, also hinted at the possibility of more modest rate hikes. The recent US economic data presented no reason for the officials to ease off. Initial jobless claims fell to 197K, below the forecasted 201K, while new home sales surged by 6.4% in August, after a 4.3% decline.

Futures markets suggest a better-than-even chance of an October rate hike, which would widen the gap between the returns of US dollar deposits and those of the Euro and the Yen. On Friday, the orders data will be released, with durable goods orders forecast at -0.4% after a 1.1% increase, and excluding transportation orders at 0.6% after a 0.4% rise.

The US Dollar is the global reserve currency, backed by gold until the Bretton Woods Agreement in 1971, and its value is primarily influenced by the Federal Reserve's monetary policy decisions aimed at controlling inflation and promoting full employment.