The US Dollar Index is at 96.00 as the Federal Reserve is expected to keep interest rates between 3.50% and 3.75%. Right now, talks are happening about US government funding, and a partial shutdown could have serious consequences. The “Sell America” initiative is affecting the US Dollar, raising concerns about possible currency intervention by the US Treasury. Discussions around funding are ongoing, with added pressure related to President Trump’s immigration policies.

The US Dollar’s Global Role

The US Dollar is the main currency in the world, making up over 88% of international foreign exchange trades. Its importance has grown significantly since World War II. The value of the USD is mainly influenced by the Federal Reserve’s monetary policy, which aims for price stability and full employment. Aside from changing interest rates, the Fed uses quantitative easing and tightening to affect the Dollar. Quantitative easing, which is used in crises, can weaken the USD, while tightening usually helps its value. This analysis comes from Akhtar Faruqui, a Forex Analyst who specializes in market trends and financial dynamics. His insights help us understand the current behavior of the USD and possible future changes.

Federal Reserve’s Policy Impact

With the US Dollar Index around 96.00, it’s important to get ready for the Federal Reserve’s policy decision later today. The market believes there is a 97% chance that the Fed will keep rates steady, so we should look for any clues about future cuts in their guidance. If they sound too cautious during the press conference, it could lead to a sell-off, making short-term put options on the dollar attractive. The risk of a partial US government shutdown could create significant political instability and market fluctuations. The shutdown from 2018 to 2019 showed how such events can make markets more volatile. This might be a good time to consider strategies that benefit from rising volatility, like buying VIX call options. It’s also wise to hedge long-dollar positions against possible drops caused by political issues. Last year, in 2025, the Fed made three rate cuts, indicating a clear dovish trend. This is backed by December 2025’s core inflation numbers, which showed a mild 2.1%, and a slowdown in job creation. The announcement of a new Fed Chair nominee adds more uncertainty; if they lean dovish, the dollar could weaken further. Reports about possible US Treasury currency intervention, along with comments from the president, pose a significant challenge for the dollar. The idea of direct intervention, a strong tool not used against the dollar in decades, shouldn’t be ignored. We should prepare for a possible drop below important technical levels, possibly aiming for the 95.00 mark in the next few weeks. Create your live VT Markets account and start trading now.

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