FX.co ★ Dollar Strengthens Further

On the first trading day of February, the dollar index advanced toward 97.7, marking its highest point in over a week and continuing its upward momentum with more than a 0.7% increase from the previous session. This rise follows a challenging January for the greenback. The shift in sentiment was influenced by US President Donald Trump's decision to nominate Kevin Warsh as the upcoming Federal Reserve Chair, which introduced new uncertainties regarding future monetary policy. Markets perceive Warsh as a more hawkish choice who is inclined towards lowering interest rates, though less aggressively than some other candidates. He is also anticipated to reduce the Fed’s balance sheet, a strategy that typically bolsters the dollar by decreasing liquidity within the financial system. Additionally, the dollar found support from US economic data that surpassed expectations, particularly with the ISM manufacturing PMI achieving its highest level since 2022 in January. Consequently, the dollar showed strength against the Japanese yen, while also gaining against the Swiss franc, the Canadian dollar, and the euro.