US Dollar Index declines ahead of NFP release

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The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, holds losses and is trading near 96.60 during the Asian hours on Wednesday.

US Dollar Index stays subdued ahead of Wednesday’s delayed jobs report for rate outlook signals.
Markets expect January Nonfarm Payrolls at 70,000, with the Unemployment Rate steady at 4.4%.
Traders expect the Fed to hold in March, with cuts likely in June and possibly September.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, holds losses and is trading near 96.60 during the Asian hours on Wednesday. Traders await the delayed US employment report scheduled to be released on Wednesday for more hints about the US interest rate outlook.

Markets expect the Nonfarm Payrolls (NFP) to show 70,000 jobs added in the US economy in January, while the Unemployment Rate is projected to remain steady at 4.4% during the same period.

The US Census Bureau reported Tuesday that US Retail Sales were flat at $735 billion in December, following a 0.6% rise in November and missing expectations for a 0.4% increase. Meanwhile, annual Retail Sales rose 2.4%.

Markets anticipate the Federal Reserve (Fed) will hold rates in March, with a first cut likely in June and a possible follow-up in September. US inflation expectations eased, with median one-year-ahead inflation expectations falling to 3.1% in January, the lowest in six months, from 3.4% in December. Food price expectations were unchanged at 5.7%, while three- and five-year expectations remained steady at 3%.

HSBC analysts Jose Rasco and Michael Zervos highlight that the Federal Reserve lowered rates by 0.25% to 3.50–3.75% and launched reserve-management purchases of short-term securities. They anticipate the policy rate will remain steady through 2026–27.

Read full article: Fed holds stance after December cut – HSBC

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.17%	-0.32%	-0.75%	-0.27%	-0.50%	-0.25%	-0.23%
EUR	0.17%		-0.15%	-0.60%	-0.10%	-0.33%	-0.06%	-0.06%
GBP	0.32%	0.15%		-0.46%	0.07%	-0.18%	0.08%	0.09%
JPY	0.75%	0.60%	0.46%		0.48%	0.25%	0.50%	0.53%
CAD	0.27%	0.10%	-0.07%	-0.48%		-0.23%	0.02%	0.04%
AUD	0.50%	0.33%	0.18%	-0.25%	0.23%		0.25%	0.27%
NZD	0.25%	0.06%	-0.08%	-0.50%	-0.02%	-0.25%		0.02%
CHF	0.23%	0.06%	-0.09%	-0.53%	-0.04%	-0.27%	-0.02%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.