Dollar index inter-market: Following Fed rate hike expectations

The US dollar and the Japanese yen were among the top performers in the currency market on Tuesday. Greenback gauged by the US Dollar Index broke above June highs and also on top of 97.00 hitting 97.13, the strongest level in four months.

Equity prices moved modestly from yesterday’s levels. Wall Street indexes are mixed while most European markets finished with modest losses. The Dow Jones was up 0.02% while the Nasdaq was falling 0.43%. The VIX index rose today but still remained near multi-month lows showing no signs of fear in markets. In the bond market, the 10-year US yield fell from 1.575% to 1.550%.

The US dollar rose today as market's expectation about a September rate hike also increased. According to the CME Group FedWatch, the odds of a move in July are zero, but it rises up to 18.0% for the September meeting (yesterday it was at 12.9%).

Economic data continues to show the US economy growing, modestly but growing. Today the housing starts and the building permits reports showed higher that expected numbers favoring the change in the Fed rate hike odds. The next round of economic data will on Thursday, includes jobless claims, Philly Fed and existing home sales.