Although the strength of the US Dollar may have waned, this safe-haven currency still holds its charm.

The US dollar rises thanks to the advantages of US PMI data. But, the US Dollar Index (DXY) only climbed slightly to its highest level in the 106.50s (October 25). Analyst suggests that the dollar's strength may have weakened, although this safe-haven currency remains the market's favorite amid various geopolitical and economic uncertainties.

us dollar today

The disparity between US PMI data compared to the Eurozone and UK PMI data had broad implications yesterday. While the release of US PMI data supported the strength of the greenback, concerns about the risk of a global economic slowdown have driven an increase in US Treasury bond yields.

The yield on the US Treasury 10-year bond touched its highest level in 16 years, reaching 5.0% yesterday and now hovers around 4.9%. The rising yields further support the dominance of the US dollar, especially against the yen and euro. However, some analysts argue that the US dollar has limited room for further gains without additional catalysts.

"I think it is mainly a risk backdrop story," said Shaun Osborne, chief foreign exchange strategist at Scotiabank in Toronto. "Weak risk appetite seems to be driving broad USD gains."

"I incline to look at these gains as an opportunity to fade some of the dollar strength against certain currencies," Scotiabank's Osborne said.

Charalampos Pissouros, senior investment analyst at XM.com, noted that investors may hesitate to increase their speculation about further Fed interest rate hikes despite the better-than-expected US PMI data. Currently, Fed Funds Futures indicate that most market participants believe that the Fed will not raise interest rates again this year, with only a 40% chance of a rate hike in January 2024.