US Dollar Rises Even as Liquidity Remains Thin in Markets
The US dollar is on the rise even though liquidity remains thin in the global forex market towards the last few days of 2021, as investors turn their attention back to the currency as the rally in equities eases. At the time of writing, the US dollar index DXY is trading around 96.23.
During the previous session, majors Euro and Sterling eased lower, giving a boost to the dollar index and sending it higher. EUR/USD lost around 0.14% of its value while GBP/USD has slipped from the highest levels seen in five weeks, supporting the greenback.
However, the US dollar lacks clear direction in the absence of fundamentals and thin liquidity as most traders stay away from the market owing to year-end holidays. For now, it looks like the investors present in the market are focusing on the optimism about the upcoming rate hike from the Fed, keeping the greenback well bid.
Meanwhile, US equities ended the previous session slightly in the red, also helping investors move towards the safety of the reserve currency instead. The S&P 500 had rallied for four consecutive sessions and touched a record high before ending Tuesday lower and ending the rally.
The uptick in the US dollar is also supported by a rise in two-year US Treasury yields, which are close to the highest levels seen in two years. Investors are also staying away from riskier cryptocurrencies as 2021 comes to close, lending further support to the more stable and safe greenback.
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