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I have a query about the current forex market. In 16 March 2020, the US Federal Reserve Bank announces to cut the interest rate to 0%. This move supposedly weaken the Dollar Index, but why for a sudden movement it becomes stronger? enter image description here

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  • $\begingroup$ Welcome! It would be useful to specify the origin of this figure. $\endgroup$ – emeryville Mar 27 at 7:13
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It is always very hard to precisely identify the causes of a particular index variation. Here, note that the U.S. Dollar Index (DXY) is a measure of the value of the US dollar relative to a basket of foreign currencies. So, the DXY Index goes up when the U.S. dollar gains value when compared to other currencies. Given that the economic slowdown is global, the US dollar could strengthen relative to other currencies

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  • $\begingroup$ Hello! Thank you for the advice man! I got the chart from TradingView. $\endgroup$ – Hypebert Mar 29 at 2:18
  • $\begingroup$ @Hypebert please upvote the answers if they did answer your question, otherwise let us know. Also feel free to accept one if you feel it's the right one! Thanks! $\endgroup$ – emeryville Mar 29 at 9:23
  • $\begingroup$ yeah I want to but when I currently can't do it. Because Stack Exchange requires me to get at least 15 reputation to publicly displayed my upvote. I'm sorry. When I reach 15 rep I'll be sure to upvote it👍 $\endgroup$ – Hypebert Mar 30 at 22:11
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Because of forced selling and a scramble for cash. People responding to margin calls, having to repay bonds etc etc. Cash demand went through the roof.

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While the fed has dropped interest rates, so have almost all other countries. The US Dollar Index (DXY) is a measure of the value of the US dollar relative to a basket of foreign currencies, so if all countries drop interest rates, the relative change should be zero.

In economically troubled times, a lot of companies and people flock to the US to buy US dollars, because it is considered a safe currency. As most trade is done in US dollars this is also the most stable currency relative to commodity prices.

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  • $\begingroup$ Incorrect. EU did not. $\endgroup$ – Frank Mar 27 at 16:26

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