US Dollar Index renews 20-year high around 111.50 on firmer yields, hawkish Fed

• US Dollar Index takes the bids to refresh multi-year high as yields rebound.
• Fed’s 0.75% rate hike, fears of economic transition and dot-plot keeps DXY bulls hopeful.
• Headlines from Russia, China also underpin the US dollars safe-haven deamand.

US Dollar Index (DXY) takes the bids to refresh the two-decade top as it rises to 111.65 during Thursday’s Asian session. In doing so, the greenback’s gauge versus the six major currencies rises for the third consecutive day to poke the mid-2002 levels.

The quote’s latest rebound could be linked to the US Treasury yields as the bond coupons regain upside momentum after retreating from the multi-year high the previous day. That said, the US 10-year Treasury yields bounce back towards the 11-year high marked the previous day, up three basis points (bps) near 3.55% whereas the 2-year counterpart rises 0.75% intraday to 4.085% at the latest, near the highest levels in 15 years.

Previously, US Federal Reserve (Fed) announced 75 basis points (bps) of a rate hike, the third one in a line of such kind, as it wants to tame inflation fears even at the cost of a “sustained period of below-trend growth” and a softening in the labor market. Fed Chairman Jerome Powell also signaled that the way to tame inflation isn’t painless ahead. While the Fed matched market forecasts, the economic fears surrounding the rate hikes and expectations of another 0.75% increase in November kept the US Dollar on the front foot, despite marking heavy volatility around the announcements.

Also supporting the greenback’s safe-haven demand was Russian President Vladimir Putin’s announcement to mobilize partial troops also reignited the Ukraine-linked geopolitical fears and the supply-crunch fears, which offered an initial run-up to oil prices before the latest downside. Recently, Ukrainian President Volodymyr Zelensky said Ukrainian neutrality is out of the question and he rules out that a settlement can happen on a different basis than the Ukrainian peace formula.

Amid these plays, Wall Street closed in the red and the S&P 500 Futures print mild losses by the press time.

Moving on, the risk catalysts and the second-tier data could entertain DXY bulls.

Technical analysis

US Dollar Index remains on the bull’s radar unless declining back below the 111.30 level comprising the late 2001 swing low.