Last Updated on 01/10/2026
- The US Dollar Index moves closer to its yearly high of 101.80, supported by hawkish signals from the Federal Reserve.
- Fed’s Kashkari signals the possibility of one additional rate hike this year and another in 2027.
- Markets now turn their attention to the US ISM Manufacturing PMI and September’s Nonfarm Payrolls (NFP) report.
The US Dollar (USD) outperforms its major currency peers on Thursday. During the Asian session, the US Dollar Index (DXY), which tracks the Greenback against six major currencies, rises 0.13% to around 101.60. The index remains close to its yearly high of 101.80.
Fundamental Analysis
What Is Driving the US Dollar Higher?
The Dollar’s latest strength appears to be supported by hawkish comments from Minneapolis Federal Reserve President Neel Kashkari during a Q&A session at the Council on Foreign Relations on Wednesday. His remarks helped reinforce expectations that US monetary policy could remain restrictive for longer.
Kashkari expressed concern that inflation remains elevated near 3% and suggested that resilient economic growth could indicate that monetary policy is not as restrictive as previously assumed. His comments about a potentially higher neutral interest rate, together with guidance for another rate hike this year and an additional increase in 2027, have strengthened the case for a prolonged period of restrictive policy.
The FXS Speechtracker gave Kashkari’s remarks a score of 7.1, above its historical average of 6.2. Meanwhile, the FXS Fed Sentiment Index edged down 0.42 points to 143.28. Despite the modest decline, the index remains well above its neutral level of 100, indicating that market expectations continue to reflect a relatively hawkish Fed stance.
What’s Next for the US Dollar?
Markets will turn their attention to the US ISM Manufacturing Purchasing Managers’ Index (PMI) for September, due at 14:00 GMT. The Manufacturing PMI is expected to rise to 55.0 from 54.6 in August.
The preliminary S&P Global PMI data for September came in stronger than expected, pointing to continued resilience in US private-sector activity and supporting expectations for a relatively restrictive Fed policy stance.
The main market focus later this week will be the September Nonfarm Payrolls (NFP) report, scheduled for Friday. Ahead of the report, the ADP Employment Change data provided a positive signal for the US labor market. ADP reported that private-sector employment increased by 90,000 jobs in September, above the 70,000 consensus estimate and August’s 36,000 increase.
US Dollar Index Technical Analysis
On the daily chart, the Dollar Index Spot trades around 101.58. The short-term technical bias remains bullish, with the index holding above its 20-day Exponential Moving Average (EMA) at 100.53. The move back above the 101.00 level has further strengthened the recent upside structure.
However, the 14-day Relative Strength Index (RSI) stands at 73.32, indicating overbought conditions. This suggests that the recent rally has become stretched, although the indicator alone does not confirm an imminent reversal.
On the downside, the 20-day EMA around 100.53 represents the first major support level. A sustained break below this area could weaken the current bullish structure. Meanwhile, the 101.00–100.50 region may become an important area to monitor if the index enters a pullback.
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