Covid-19 kept raging the US, amid which the latest spate of economic data signaled a turn for the worse.
The Federal Reserve Vice Chair Randal K. Quarles said in a recent speech that he was optimistic about the country's economic outlook, which could push the dollar higher in the short term and keep the dollar dominating non-USD currencies.
The US Dollar Index bounced up by around 1% after releasing the minute of Federal Reserve Board on 19 Aug, breaking the record high since this March.
Recently, markets seem to calm down as the U.S. stocks settled higher above early low and the VIX largely shrank 5 percentage points.
In the following week, USD may keep retreating under the pressure of stock markets and Fed rate decision.
USD is experiencing its longest downtrend since 2010, while the consecutive decline recently is the second worst one since April 2011. The future trend of USD is now testing market sentiments.
S&P 500’s steep fall of 6% within one day last week gave the market risk warnings. Such a swift and sudden fluctuation usually benefits dollar as a global reserve currency, but on the other hand, demand for dollar may reduce if market volatility further declines.
The Federal Reserve’s interest rate decision to be announced at 18:00 GMT on Wednesday may expose dollar-linked currency pairs such as EUR/USD, GBP/USD, USD/JPY, USD/CAD and AUD/USD to an above-average level risk of price fluctuations.
Hong Kong stock market tumbled downhill after opening on 28th, falling over 2% at one point. In addition, Renminbi has been depreciating recently mainly due to the USD Index jittering at a high level in the risk-off market.