Dollar Holds Firm as Strong U.S. Data, Fed Expectations and Global Central Bank Moves Shape Markets

The U.S. dollar remained resilient on Tuesday, supported by upbeat economic data and shifting expectations around Federal Reserve policy, even as concerns lingered over the possibility of another U.S. government shutdown. Positive signals from the U.S. economy and easing geopolitical tensions helped underpin the greenback, keeping investors focused on growth and interest rate outlooks rather than political risks.

The dollar index, which tracks the greenback against a basket of major currencies, hovered near 97.50 after two consecutive days of gains. The recent strength in the dollar followed stronger-than-expected U.S. manufacturing data from the Institute for Supply Management, which showed activity returning to growth territory. Although a key U.S. jobs report faces potential delays due to political gridlock in Washington, market sentiment toward the dollar remained broadly constructive.

Expectations surrounding U.S. monetary policy have also played a significant role. The dollar has trended higher since President Donald Trump nominated Kevin Warsh as the next Federal Reserve chair. Analysts believe Warsh is less inclined to push for aggressive interest rate cuts compared with other potential candidates, reinforcing the view that U.S. rates may stay higher for longer, a factor that typically supports the dollar.

Geopolitical developments added to the supportive backdrop. The United States announced a new trade deal with India, easing trade tensions and reducing uncertainty. At the same time, nuclear talks between the U.S. and Iran are set to resume, helping calm markets concerned about escalating conflict in the Middle East.

In currency markets, the Australian dollar climbed ahead of an expected interest rate hike by the Reserve Bank of Australia, rising to around $0.6965. The New Zealand dollar and British pound also edged higher. Meanwhile, the Japanese yen remained weak amid political uncertainty and expectations of more expansionary fiscal policy ahead of Japan’s upcoming election.

In digital assets, cryptocurrency prices were mixed, with bitcoin trading near $78,840 and ether slightly higher, reflecting steady risk appetite across global markets.