US Dollar Index pushes higher, in new 2021 highs around 93.60

• The index moves to new YTD highs in the 93.60/65 band.
• High volatility, steady yields prop up the risk-off mood.
• Fed’s Kaplan is due to speak later in the NA session.

The greenback keeps the positive note well and sound for yet another session and navigates in 2021 highs around 93.60 when gauged by the US Dollar Index (DXY).

US Dollar Index up on risk aversion, taper speculations

The index advances uninterruptedly since Monday and now clinches levels last seen in November 2020 above the 93.60 level on the back of coronavirus jitters, taper talk and the rebound in volatility.

The prevailing risk-off sentiment follows fresh COVID concerns mainly stemming from the progress of the delta variant and its potential effects on the growth outlook. This preference for the safe havens sustained the demand for the dollar in past weeks along with the Fed’s intentions to start trimming the bond-purchase programme at some point towards year-end.

By the same token, volatility expressed by the VIX index (aka “the panic index”) climbed to multi-day highs above the 20.0 yardstick, extending the weekly bounce from as low as the 15.0 area seen at the end of last week.

Also supporting the improved momentum in the greenback appears the uptick in US 10-year real yields from early August around -1.17% to the vicinity of the -1.0%.

Nothing in the US data space other than a speech by Atlanta Fed R.Kaplan (2023 voter, hawkish). On Thursday, weekly Claims and the Philly Fed index disappointed expectations, while the Leading Index tracked by the Conference Board ticked higher.

What to look for around USD

The dollar trades in fresh tops vs. its peers, extending the upbeat mood in the wake of the publication of the FOMC Minutes on Wednesday, where the Committee acknowledged that the QE tapering is closer than previously expected and the “sustained further progress” in the labour market still needs to be met in spite of the persistent economic recovery. Further support for the buck comes in the form of fresh coronavirus concerns, high inflation and the soft note in the risk complex.

Eminent issues on the back boiler: Biden’s multi-billion plan to support infrastructure and families. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Debt ceiling debate. Potential hint at the timing of QE tapering at the Jackson Hole Symposium. Geopolitical risks stemming from Afghanistan.

US Dollar Index relevant levels

Now, the index is gaining 0.03% at 93.59 and a break above 93.62 (2021 high Aug.20) would open the door to 94.00 (round level) and then 94.30 (monthly high Nov.4 2020). On the flip side, the next support is located at 92.47 (low Aug.13) followed by 92.37 (50-day SMA) and finally 91.78 (monthly low Jul.30).