Dollar Strengthens to 4-Week High, US Data a Boost
The US dollar index (DXY) strengthened near 98 on Thursday (February 19), hovering near a four-week high. This strengthening was driven by a combination of solid US economic data and a hawkish tone from the Federal Reserve, which has led the market to reduce expectations for aggressive interest rate cuts this year.
The minutes of the latest FOMC meeting showed policymakers were divided on the direction of interest rates, with some still leaving open the possibility of further increases if inflation remains high. This signal tempered expectations of a "quick rate cut" and helped the dollar maintain momentum.
The dollar also received support from escalating US-Iran tensions, which pushed up oil prices. The rise in oil has reignited inflation concerns, leading the market to perceive the Fed as having less room to loosen policy aggressively—a condition that tends to be positive for the dollar.
On the data front, initial jobless claims fell more than expected to 206,000 last week, indicating that the labor market remains resilient. Meanwhile, the US trade deficit in 2025 is said to remain among the largest in history, increasing market attention on the US external balance.
Although expectations of easing have been reduced, the market still expects two 25 basis points cuts by the end of the year. This means that the dollar's future direction will depend heavily on whether subsequent inflation and economic activity data reinforce the "higher for longer" narrative or reopen the scope for rate cuts.
Source: Newsmaker.id
