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  • Dollar index is trading at the highest level in over two years.  
  • The index is reporting year-to-date gains despite the drop in the US yields.  
  • Rate differentials favor further upside in the US Dollar.  

Dollar index (DXY), which tracks the value of the greenback against major currencies, is currently trading at 99.49 – the highest level since May 2017.  

The index gained 3.4% in the third quarter – the biggest quarterly gain since second quarter of 2018.  

As of writing, the index is reporting a 3.61% gain on a year-to-date basis.  

It is worth noting that the US Treasury yields are reporting a year-to-date loss. For instance, the benchmark 10-year yield is currently down more than 100 basis points on a year-to-date basis.  

Even so, the US Dollar has managed to eke out gains and rise to 2.5-year highs.

Looking forward, the greenback may continue to gain altitude, as the bond yields across Europe and Japan are offering negative yields. Further, the central banks in Australia and New Zealand are widely expected to hit the zero lower bound next year.  

The US yields, therefore, will remain attractive, especially because the US economy is relatively strong and the Federal Reserve has room to stand pat for the rest of the year, having delivered two rate cuts in the third quarter.  

Technical levels