Dollar Rebounds Amid Global Central Bank Policy Divergence

The dollar rebounded as the euro dipped following global central bank meetings, setting expectations for diverging rate cut paths. The dollar index resumed its upward trend, influenced by a measured pace of Fed rate cuts, contrasting moves, and U.S. economic indicators impacting investor sentiment.

The dollar showed signs of a strong rally on Monday while the euro saw a dip. Global central bank meetings dictated this shift, forecasting different rate cut paths soon. The U.S. dollar index, measuring against six major counterparts, resumed its upward track despite a previous sharp drop due to lower-than-expected inflation data.

This marks the dollar's fourth rise in five sessions, a gain of 1.2%, spurred by the Federal Reserve's projection of cautious rate cuts that spurred both the dollar and Treasury yields upward. Chief strategist Marc Chandler suggests any dollar weakening will follow a market shift towards Fed's dovish stance.

Economic signals were mixed: soaring U.S. manufacturing orders contrasted with declining consumer confidence. Traders see limited chances of Fed rate cuts until May, amid thin trading in the holiday week. Meanwhile, the dollar's momentum saw the yen weaken, amid speculative intervention, and sterling fell slightly following the Bank of England's steady rate decision.

(With inputs from agencies.)