The U.S. dollar is back on the upswing and headed toward the year-to-date highs seen in mid-July following a period of relative dormancy over the past month as investors pulled back on expectations of an imminent U.S. recession.The ICE U.S. Dollar Index
DXY,
+0.58%
soared 0.6% to 108.12 on Friday on its way toward the 2022 high recorded on July 14. Overnight, the greenback sliced through key technical levels against three of its major counterparts — the euro, British sterling and Japanese yen — “like a hot knife in butter,” suggesting the dollar has enough momentum to keep going even higher, said Marc Chandler, managing director and chief market strategist at Bannockburn Global Forex in New York. Much of what drives the dollar depends on what’s going on in the rest of the world. In this case, the eurozone is at risk of a recession, Russia’s economy has contracted sharply, U.K. inflation is atop 10%, China’s central bank has unexpectedly cut interest rates amid signs of slowing growth and Pacific Rim nations including Japan are on edge about a possible war over Taiwan.“In the ugly contest, the U.S. is the least ugly,” considering signs that the world’s largest economy can keep expanding in the third quarter, Chandler said via phone. “The fundamental reason for the dollar’s uptrend resuming is that our rivals and competitors are hurting more than we are.” A strong dollar tends to accompany tighter financial conditions in the U.S., while easing financial conditions typically sap the greenback’s strength. Indeed, investors were preoccupied with the prospect of higher interest rates on Friday, after monetary-policy maker Thomas Barkin of the Richmond Fed said …
