DXY: Watching the Dollar’s Appreciation

■ The US dollar strengthened while the yen weakened, driven by monetary policy decisions from the Federal Reserve (FOMC) and the Bank of Japan, with the USD/JPY pair targeting 151 yen.  

■ The US dollar index (DXY) rose again after seven months, showing clear signs of bottoming out. The question remains whether it will rise further. 

   The Bank of Japan held its policy interest rate steady during its monetary policy meeting on July 30-31. In its Economic and Price Outlook Report, the Bank acknowledged the current extremely low level of real interest rates and reaffirmed its policy of gradually raising interest rates as economic and price conditions improve. Regarding the consumer price index (core CPI, excluding fresh food), the policy board's median forecast for 2025 predicts a year-on-year increase of 2.7%, up from 2.2% in April, driven by rising food prices, including rice. The risks to the price outlook were adjusted from "downward-leaning" to "basically balanced." President Kazuo Ueda stated, "The likelihood of achieving the price outlook has slightly increased due to the reduction in uncertainty related to tariffs," but also cautioned that "the development of trade policies of various countries and their impact remain uncertain." He added, "We will closely monitor how trade policies influence the economy and markets, and whether businesses continue to proactively set wages and prices, and will make appropriate decisions at each meeting." He did not specify a clear path for future interest rate hikes. Currently, short-term financial markets assign less than a 12% probability of a rate increase in September and slightly below 43% for October. 
 
 
   Following the Federal Reserve and Bank of Japan's monetary policy meetings, along with press conferences by Fed Chair Powell and Bank of Japan Governor Ueda, the dollar's rise and yen's decline both intensified in the foreign exchange market. The USD/JPY pair approached 151 yen during today's Asian session. The US Dollar Index (DXY) has risen for six consecutive trading days and closed higher for July—the first time in seven months. On July 1, the DXY touched a low of 96.377, suggesting a potential bottom, and has since rebounded to 100.145. The year-to-date decline was 12.5%, while the current rebound has been only 3.9% (based on the highs and lows). This indicates that the dollar still appears to be on a depreciating trend. 
 
   However, uncertainty remains regarding US tariff policies. For example, negotiations between the US and China are ongoing; tariffs on Canada have been increased to 35%, while the implementation of a 30% additional tariff on Mexico has been postponed for 90 days. In this context, if the US continues to dominate negotiations with its trading partners, the DXY could rise further in the short term. From a technical perspective, whether the US dollar index can break through the weekly Ichimoku Kinko Hyo baseline of 103.129 and the half-retracement level of 103.277—since the start of the year—will be key to determining if it climbs further.