The dollar index (DXY00) on Friday rose by +0.01%. The dollar on Friday gave up most of an overnight advance and finished little changed. The dollar spiked higher in overnight trade after US officials said Israel launched a retaliatory air strike against Iran in response to Iran’s rocket and drone attack on Israel last weekend. However, the dollar fell back from its best levels on signs the damage was minimal, and an Iranian military official downplayed the attack. Lower T-note yields Friday also weighed on the dollar.
Liquidity demand for the dollar increased Friday after the S&P 500 tumbled to a 1-3/4 month low. The dollar is also supported as Fed rate-cut expectations have dropped sharply due to recent strength in US economic news and hawkish Fed comments. Swap markets are discounting the chance of a Fed rate cut at the June FOMC meeting at 19%, much less than the 66% chance the market had priced in earlier this month.
