US Dollar Index shoots back to 82 as investors eye safe haven greenback

The US Dollar Index has sprung back into life in the last few days and is now trading back above 82 following Wednesday’s US Fed announcement on the QE program that has investors and traders piling into their safe haven currency.

Latest US Dollar Index Rate

The ICE US Dollar Index, which tracks the US dollar against a basket of six major world currencies was trading at 82.055, 09:05 GMT this morning on the ICE Futures Exchange. The US dollar has rallied since the Federal Reserve’s statement late Wednesday, signaling it could slow its asset purchases this year if the economy improves further.

“The price action in the US dollar confirms that the Federal Reserve meeting marked a major turning point for the greenback,” said Kathy Lien of BK Asset Management.

US Manufacturing Data

Stronger-than-expected data on factory activity in the US mid-Atlantic region and in home resales added to the dollar’s momentum, overshadowing an earlier report showing a rise in weekly jobless claims.

Investors re-established bullish bets on the dollar after Fed Chairman Ben Bernanke, following the central bank’s two day policy meeting that concluded on Wednesday, said the Fed was likely to end its bond-buying program, known as QE by mid 2014.

“The prospect of less QE (and) higher interest rates is something that should help the dollar, particularly in an environment where some other central banks are still moving in the other direction,” said Robert Lynch, senior currency strategist at HSBC in New York.

Euro to see a Bashing?

Analysts said the dollar could see volatile moves in the coming weeks as investors use every piece of economic data to try to gauge the health of the economy.

“Volatility is going to be the name of the game. We’re going to see some big ugly moves,” said Ronald Simpson, managing director of global currency analysis at Action Economics in Tampa, Florida.

The dollar’s resurgence could put an end to the recent resilience of the euro, potentially pushing it below $1.30 as markets become wary about the prospect of lower ECB interest rates.

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US Dollar Index shoots back to 82 as investors eye safe haven greenback