Solid Gold Berjangka - The US Dollar Index (DXY) began to correct on Tuesday (Oct 13) after previously hitting an 18-month high. The DXY fell approximately 0.3% to 102.269, having touched 102.607 earlier. This weakness raises the question of whether the Dollar's rally is losing steam, though indicators suggest it is too early to conclude a trend reversal.
In terms of valuation, the Dollar is considered relatively expensive against almost all G10 currencies. This suggests that the Dollar's recent appreciation may be overextended. However, a high valuation does not automatically mean the Dollar will immediately weaken; the market still requires a clear fundamental trigger to shift that trajectory.
One factor continuing to support the Dollar is the expectation of relatively higher interest rates from the Federal Reserve compared to other major central banks. As long as the market anticipates a tight US monetary policy stance, demand for the Dollar is likely to persist. Even if oil prices fall and inflationary pressures ease slightly, the scope for Dollar depreciation may remain limited.
Meanwhile, weakness in global bond markets keeps the Dollar attractive as a defensive asset. When investors face financial market uncertainty, the Dollar tends to see demand due to its high liquidity. This means that even with the DXY at elevated levels, its status as a safe-haven asset could still prevent a deeper correction.
The Dollar is currently showing signs of being overbought, yet there is no confirmation of a trend reversal. The next key step is identifying a catalyst capable of genuinely shifting interest rate expectations and global risk sentiment. As long as Fed expectations remain hawkish and bond market uncertainty stays high, the dollar retains a foundation to remain strong, even though short-term corrections are beginning to emerge.