The dollar index rose to nearly 97.5 in the first trading session of February, its highest level in over a week, extending gains of more than 0.7% from the previous session. This rise follows a weak performance for the dollar during January.
The main boost to the US dollar came after President Donald Trump announced his nomination of Kevin Warsh to head the Federal Reserve, creating uncertainty about the future of monetary policy. Markets view Warsh as a more hawkish candidate, likely to favor a slower pace of interest rate cuts compared to other potential nominees.
Worsch is also expected to work on shrinking the Fed's balance sheet, a move that would reduce liquidity in the markets, which usually supports the dollar.
In addition, the dollar received further support from strong US economic data, with the Institute for Supply Management (ISM) manufacturing index unexpectedly rising to its highest level since 2022 during January.
Regarding currencies, the dollar made gains against the Japanese yen, and also rose against the Swiss franc, the Canadian dollar and the euro, amid increasing investor demand for the US currency.