04.02.202614:18:09UTC+00US Dollar Index Holds Rebound

On Wednesday, the dollar index stood at 97.5, maintaining a modest recovery after reaching a near six-year low of 96 in late January. This slight rebound occurred against a backdrop of fluctuation among currency basket counterparts as markets continued to navigate the Federal Reserve's uncertain interest rate outlook for the year. The delay of critical labor market data heightened the focus on the ADP report, which fell short of expectations, reinforcing the perception of a sluggish hiring environment in the U.S. Despite this, the dollar retained much of its recovery, partly due to lower inflation levels in the Eurozone, which sustained expectations that subdued prices and a weaker dollar could lead the European Central Bank (ECB) to consider easing rates this year. Furthermore, the yen faced continued selling pressure amid reports suggesting that the Bank of Japan (BoJ) faces significant obstacles to intervening in currency and bond markets if Prime Minister Takaichi is re-elected and implements expansive fiscal policies. Domestically, the influx of dollars could be constrained, as the incoming Federal Reserve Chair, Kevin Warsh, favors a leaner Federal Reserve balance sheet.