DXY: Dollar Index Hits Two-Year High Against Forex Rivals as Rate Cut Outlook Settles

King dollar rules the forex board Friday as the mighty US currency popped to a two-year high against a basket of six rivals.

• The US dollar index DXY, which measures the buck’s strength against six other currencies, rushed through the chart to pop to a two-year high of 108.50 early Friday with forex traders keen to bet on the buck after the Federal Reserve’s latest updates. The US central bank sparked a dollar rally with its rate cut message, or more specifically, rates are only going down twice next year. And that is, if the economy continues to grow, the labor market stays resilient and inflation doesn’t flare up.
• In all that, the greenback was pretty much the only winner as relatively high interest rates maintain the dollar’s appeal to foreign investors and help consumers get better yields on their deposits. Inflation will get another shot today with the Federal Reserve’s favorite measure, the PCE. Short for consumption expenditures index, the PCE index includes more comprehensive data than the headline inflation in the CPI.
• Against this backdrop, the Japanese yen tumbled to a seven-month low, sinking beyond ¥157.90 before paring back some of the loss. The sharp updraft in the dollar-yen arrived after the Bank of Japan stayed put on interest rates (instead of a hike). The sterling is in the same boat — its own central bank, the Bank of England, kept interest rates flat (instead of a cut) and hit the pound’s valuation. The euro-dollar floats near a two-year low.