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The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is edging lower after registering modest gains in the previous session. The DXY is trading around 99.30 during the Asian hours on Friday. Traders are likely to look for further direction from the US December Industrial Production data and comments from Federal Reserve (Fed) officials later in the day.

The Greenback received support after Thursday’s US Initial Jobless Claims data reinforced the likelihood that the Fed will keep interest rates on hold for the coming months. According to the CME Group's FedWatch tool, Fed funds futures continue to price in about a 95% probability that the US central bank will keep rates unchanged at its January 27–28 meeting.

Data from the US Department of Labor (DOL) showed Initial Jobless Claims unexpectedly fell to 198K in the week ended January 10, below market expectations of 215K and down from the prior week’s revised 207K. The data confirmed that layoffs remain limited and that the labor market is holding up despite an extended period of high borrowing costs.

The US Dollar may find additional support as Fed funds futures have pushed expectations for the next rate cut back to June, reflecting stronger labor market conditions and policymakers’ concerns over sticky inflation.

Market sentiment improved after US President Donald Trump said he has no plans to remove Fed Chair Jerome Powell despite reported Justice Department indictment threats and signalled a possible delay in action on Iran. Sentiment was further supported after the US and Taiwan signed a trade agreement on Thursday aimed at boosting American semiconductor production in exchange for lower tariffs.

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