The US Dollar Index (DXY), which tracks the price action of the dollar against the top seven currencies, enjoyed some upward mobility this week amid the worsening risk-off sentiment across the financial markets.
The greenback recorded its fourth consecutive bullish day on Tuesday, as it received support from heightened geopolitical fears as military presence and tensions increased in Eastern Ukraine.
The market recorded a surge in risk-averse investor behavior after Russian President Vladimir Putin announced in a televised statement that Russia recognized the independence of Donetsk and Luhansk, as it becomes more likely that an invasion of Ukraine could happen in the near term.
That said, the dollar’s safe-haven appeal remains intact as long as the geopolitical tensions persist. Meanwhile, the US cash market appears to be returning to normalcy as yields jump in the shorter time frame, following yesterday’s President’s Day Holiday.
Moving on, market participants will likely look to the US docket on Tuesday, which includes the Consumer Confidence gauge for February and Markit’s Flash Manufacturing/Services PMIs, for near-term price action clues.
Also, the focus will be on house prices following the release of the FHFA’s House Price Index and the S&P/Case-Shiller Index.
US Dollar Receives Additional Support from Hawkish Fed Stance
The DXY has planted a solid footing above the 96.00 mark in the European session on Tuesday, as interest in safe-haven assets increased. Apart from the geopolitical developments around the Russia-Ukraine standoff, the greenback also gets some support from the corrective downtrend in US yields.
Without the ongoing risk-off sentiment, the prevalent view on the dollar was that it remains propped up by the rising inflation narrative and the possibility of a more aggressive stance by the Fed on its monetary policy.
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