--- title: "The US Dollar Index Returns to the 100 Mark: What’s Next?" type: "News" locale: "en" url: "https://longbridge.com/en/news/294905717.md" description: "Following the market shakeout triggered by yen intervention, the US Dollar Index has once again touched the 100 integer mark. Neutral positioning, matched interest rate differentials, and ambiguous rate hike expectations—these three signals all point to the same conclusion: the US dollar is suspended in a delicate intermediate state, poised to move either up or down. However, July US economic data showed resilience that exceeded expectations, coupled with the Federal Reserve's urgent need to rebuild its hawkish credibility at the Jackson Hole Annual Symposium. Consequently, short-term downward momentum for the US dollar may have already exhausted" datetime: "2026-08-05T03:42:42.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/294905717.md) - [en](https://longbridge.com/en/news/294905717.md) - [zh-HK](https://longbridge.com/zh-HK/news/294905717.md) --- # The US Dollar Index Returns to the 100 Mark: What’s Next? After experiencing a market shakeout driven by yen intervention, the US Dollar Index has returned to the 100 mark. The level of 100 is a highly sensitive integer threshold, and the US dollar exchange rate is currently in a delicate intermediate state. Therefore, today we will discuss observations on the US dollar's market performance at the 100 mark. Why is the US dollar exchange rate in an intermediate state? Several perspectives are worth considering: First, let's look at positioning. Foreign exchange options data shows that the 25-delta risk reversal (25D RR) implied volatility for the US dollar against a basket of currencies has declined to a neutral level. This indicates that bullish sentiment toward the US dollar has faded, currently resting at a neutral level. Next, let's examine interest rate differentials. Currently, the 2-year interest rate differential between the US and non-US economies is approximately 150 basis points, which basically aligns with the US Dollar Index, indicating no significant overvaluation or undervaluation. From the perspective of interest rate differential comparisons, a US Dollar Index at 100 is also roughly neutral. Third, consider rate hike expectations. The market is currently pricing in a 64% probability of a Fed rate hike in September, which is also an ambiguous level, indicating that the market has not yet formed a consensus expectation. Overall, combining dimensions such as positioning, interest rate differentials, and expectations, the US Dollar Index at the 100 mark is in a delicate intermediate state. This is essentially a position that could move either up or down. So, what is the outlook for the US dollar going forward? From the perspective of the second half of the year, the author does not anticipate a strong US dollar (refer to "Reconsidering the Framework for US Dollar Exchange Rates"). However, the recent decline in the US Dollar Index was driven by too many one-off shock factors (such as yen intervention and Fed meetings). Standing at the 100 mark, the author believes that the short-term downward momentum of the US Dollar Index is insufficient, and it may even experience a limited rebound. There are two main considerations: First, preliminary data from July shows that US economic data remains quite resilient. The US ISM Manufacturing PMI in July hit a nearly four-year high, while initial jobless claims have remained at relatively low levels in recent years. Preliminary data indicates strong resilience in the US economy, though we still need to wait for the official non-farm payrolls report to provide the final verdict (expected at 83,000 this month, compared to the previous value of 57,000). Second, the Federal Reserve has the subjective motivation to release hawkish signals. Referencing the significant rise in long-end US Treasury yields following the Fed's interest rate decision meeting, the market is indeed concerned about the risk of insufficient Fed credibility and unanchored inflation expectations. Waller has an opportunity to salvage the situation (at the Jackson Hole Annual Symposium in late August), and some hawkish voting members have already been hinting to the market about the necessity of "preemptive rate hikes." Overall, regarding the US Dollar Index at the 100 mark, it is worth maintaining a sense of expectation. Summary of today's sharing: 1. After experiencing a market shakeout driven by yen intervention, the US Dollar Index has returned to the 100 mark. From the perspective of the US dollar exchange rate's market performance, positioning, interest rate differentials, and expectations are all at relatively neutral levels, placing the US Dollar Index in a delicate intermediate state; 2. From the perspective of the second half of the year, the author does not anticipate a strong US dollar. However, the recent decline in the US Dollar Index was driven by too many one-off shock factors. Standing at the 100 mark, the author believes that the short-term downward momentum of the US Dollar Index is insufficient, and it may even experience a limited rebound; 3. Preliminary data from July shows that US economic data remains quite resilient, awaiting the final verdict from this Friday's non-farm payrolls report. Against the backdrop of market concerns about the Federal Reserve's credibility, the Fed also has the motivation to release somewhat hawkish signals, giving Waller an opportunity to salvage the situation (at the Jackson Hole Annual Symposium in late August). Overall, regarding the US Dollar Index at the 100 mark, it is worth maintaining a sense of expectation. 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