On Tuesday (Oct 25), the sub-session, rose, temporarily traded at 111.99, or 0.10%.
As balance sheets continue to shrink in tandem, analysts expect reserve balances to continue to fall.
So far, the Fed‘s assets have fallen by about $120 billion, while reserve balances have fallen by about $330 billion. Reserve balances have fallen faster than balance sheets.
The source of the recent volatility in global markets is the tightening of dollar liquidity.
Although the dollar spreads around the world in various forms, and liquidity is also transmitted through various channels to expand, the root cause of the dollar liquidity expansion is the Federal Reserve’s release. In the current environment of the Federal Reserve raising interest rates and reducing the balance sheet to combat inflation, analysts believe that liquidity tightening is still on the way.
The dollar index has short term support at 111.35/111.40, the important short term support at 110.80/110.85.
