US Dollar Index Rises Near 97.50 on Fed Signals.

The US Dollar Index edged higher, approaching the 97.50 level, supported by risk-off sentiment and cautious signals from the Federal Reserve.

The US Dollar Index (DXY), which tracks the greenback against six major currencies, is rebounding after two consecutive sessions of losses, trading near 97.30 during Asian hours on Wednesday. Market participants are awaiting key US data releases later this week, including Q2 Annualized GDP and the Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge.

The dollar’s strength is underpinned by cautious remarks from Federal Reserve Chair Jerome Powell, who highlighted the challenge of balancing persistent inflation with signs of labor market softness. Powell reiterated his earlier comments, describing the situation as “challenging.” Meanwhile, the CME FedWatch tool shows futures markets are pricing in a 92% probability of a rate cut in October, slightly higher than the 90% likelihood seen a day earlier.

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Recent economic indicators also reflect moderating US momentum. The S&P Global flash PMI report revealed a slowdown in September, with Composite PMI easing to 53.6 from 54.6 in August. Manufacturing PMI dipped to 52.0 from 53.0, while Services PMI slipped to 53.9 from 54.5, signaling waning demand across sectors.

In addition to domestic factors, geopolitics may further support safe-haven flows into the dollar. At the UN General Assembly, President Donald Trump threatened a fresh round of “very strong and powerful tariffs” against Russia if it fails to end the war in Ukraine. He also criticized European countries for purchasing Russian energy, warning that such dependence effectively “funds the war against themselves,” and urged the EU to align with Washington on sanctions to maximize their impact.