US Dollar Index (DXY) holds gains as markets await US CPI data

• The US Dollar Index holds gains around 99.00, supported by fresh Sino-US trade frictions.
• Trump threatened to curb a wide range of software exports to China.
• US Dollar rallies remain limited with investors awaiting the release of US CPI data.

The US Dollar weakness has been short-lived, and the USD Index is retracing on Thursday most of Wednesday's losses, returning above the 99.00 level, as fresh trade frictions between the US and China have dampened risk appetite ahead of the release of the US Consumer Prices Index, due on Friday.

The USD Index, which measures the value of the Dollar against a basket of currencies, appreciates moderately on Thursday, as US President Donald Trump affirmed that he is considering restrictions on a wide array of software exports to China

Fresh trade tensions dampen risk appetite

Reuters reported on Wednesday that US authorities are working on a plan to curb imports of software-related products, from laptops to jet engines, in retaliation for the Chinese decision to restrict exports ot rare earths to the US and other Western countries.

This news has dampened risk appetite and provided a fresh impulse to the US Dollar, although rallies have been limited so far. Trump reiterated on Wednesday that he is optimistic about sealing a deal with the Chinese PM Xi next week, which will avoid these threats from coming into effect.

Meanwhile, market speculation that the new Japanese authorities would be preparing a USD 90 billion stimulus programme to help households cope with higher price pressures has hammered the Yen, increasing support for the Greenback.

US Dollar's upside attempts, however, remain limited, with investors looking from the sidelines ahead of the release of September's US CPI data. Yearly inflation is expected to have accelerated above the 3% level, although the core CPI is seen growing at a steady 3.1% yearly rate, unchanged from the previous month.