DXY Rises Near 98, Tariffs & the Fed in Focus
The US Dollar Index (DXY) rebounded after two days of weakness and hovered around 97.80 during Tuesday's Asian session, with the possibility of testing the 98.00 area. The market is awaiting employment data such as the ADP Employment Change and comments from Fed officials for further direction.
Despite the slight strengthening, the dollar remains overshadowed by the risk of trade uncertainty. President Donald Trump's administration is reportedly considering national security tariffs on around six industries through Section 232 (separate from the 15% global tariff). This issue has triggered reactions from trading partners: the European Union has signaled it may delay ratification of a trade deal with the US, while the India-US trade meeting to finalize an interim pact has also been postponed. Markets are also doubting the longevity of the policy, as it is unlikely to be extended beyond the 150-day limit.
From the monetary side, Fed Governor Christopher Waller emphasized that his support for a potential interest rate cut at the March meeting will depend heavily on February labor market data. Currently, the swap market only gives a small chance (around 5%) of a 25 bps rate cut in March, indicating that the Fed is still leaning towards "waiting for data certainty."
Looking ahead, the dollar could potentially come under additional pressure if market expectations for a US interest rate cut in 2026 persist (around 50 bps), while the Bank of Japan is projected to continue raising interest rates and the ECB is expected to hold policy. The combination of interest rate differentials and tariff uncertainty makes the DXY's gains vulnerable to instability and could easily reverse if risk sentiment deteriorates again. (asd)
Source: Newsmaker.id
