US Dollar Index holds gains near 100.00 as traders focus on US jobs data and Iran conflict

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The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 100.00 during the early European trading hours on Friday. The DXY holds positive ground amid fresh concerns over a prolonged conflict in the Middle East.

US Dollar Index holds gains around 100.00 in Friday’s early European session.
Trump pressures Iran to make a deal after a military strike destroys a bridge near Tehran.
The US March jobs data will be in the spotlight later on Friday.

US President Donald Trump said on Thursday that the war's core objectives are "nearing completion" and could wrap up in two to three weeks. He warned he would bomb Iran "back to the Stone Age" if they did not agree to an unconditional surrender.

Meanwhile, Iran’s foreign minister Abbas Araghchi stated that the attack wouldn’t force Tehran to surrender. “It only conveys the defeat and moral collapse of an enemy in disarray,” he said. A prolonged conflict between the US and Iran could prompt traders to seek a safe-haven currency such as the US Dollar in the near term.

Nonetheless, US tariff threats might cap the upside for the DXY. Bloomberg reported on Thursday that Trump signed an executive order that could slap up to 100% on certain imported medicines from companies that don't reach deals with his administration in the coming months.

Traders await the release of the US March jobs data later on Friday for fresh impetus. The US economy is projected to see 60,000 job additions in March, while the Unemployment Rate is expected to hold steady at 4.4% during the same period. In case of softer-than-expected outcomes, this could weigh on the USD against its rivals.

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.