The US dollar strengthened due to the liquidation of higher-risk assets amid market concerns about the future of the global economy.

The US dollar index skyrocketed around 0.6% in Tuesday's New York trading session (April 25). Market concerns about the future of the global economy have triggered a risk-off sentiment that tends to benefit safe haven currencies like the US dollar compared to other risk-sensitive assets.

dxyDXY Daily chart via TradingView

Two recent US housing data releases tonight show better-than-expected performance. However, the market is more focused on two other data points that indicate a significant decline in consumption and production activity.

Data from The Conference Board shows the US consumer confidence index dropped to the lowest level in the last nine months to 101.3 in the April 2023 survey results. Previously, market participants expected the data to remain strong at 104.0.

The Manufacturing Index released by The Fed Richmond also fell. This data has declined for four consecutive months to reach -10 in April.

Both data points triggered another round of risk-off in financial markets. US stock indexes fell, while the US dollar strengthened due to the liquidation of higher-risk assets.

"Today is more about defensive risk sentiment, especially in equities. It's hard to detect a strong trend though," said Vassili Serebriakov, FX strategist at UBS in New York. "The bias is for dollar weakness, but I think until U.S. data weakens substantially, it's hard to see that trend really picking up," he added. 

Banking turmoil has also returned to the market's attention. The media reported that third-party deposits at First Republic Bank had dropped dramatically. First Republic is one of the troubled banks that received a $30 billion bailout last month, so this report indicates that the company is still at risk of going bankrupt.

As usual, such turmoil boosts the popularity of safe-haven currencies. Not only the US dollar takes the opportunity to rise, but the Japanese yen is also observed to strengthen against all other major currencies; USD/JPY slips about 0.3%, while EUR/JPY and GBP/JPY drop almost 1.0%.