Dollar Climbs Against Majors
19 December 2014 - 11:51PM
RTTF2
The U.S. dollar was higher against its major rivals in European
deals on Friday, amid diverging monetary policy of the Federal
Reserve, with that of the central banks of Europe and Japan.
While the Fed indicated a tightening stance by mid 2015, the
European Central Bank and the Bank of Japan are pursuing stimulus
measures, which tend to weaken their currencies.
The Fed struck to pledge of raising rates by next year, making
dollar denominated assets more attractive. This is in sharp
contrast with the European Central Bank's stance, which is ready to
expand asset program to support fragile recovery.
Switzerland's central bank imposed negative interest rates on
Thursday and indicated readiness to act further, as it seeks to
discourage buying of the franc as a safe haven.
The dollar got a boost on Thursday, as falling U.S. jobless
claims and Fed's assurance that rates would be increased as planned
gave faith in the economy.
In its policy statement released on Wednesday, the Fed indicated
that it is prepared to hike interest rates as scheduled, while
replacing its "considerable time" language with a new language that
the bank "can be patient" about the timing of the first rate
hike.
Markets cheered the Fed chairwoman Janet Yellen's comments, who
sounded an upbeat assessment of the economy, while signaling that
the rates would rise after the "next couple of meetings."
The greenback edged up to 0.9822 against the franc, compared to
0.9796 hit late New York Thursday. The next possible resistance for
the greenback-franc pair may be found around the 1.00 mark.
The greenback spiked up to 1.2252 against the European currency,
its highest since December 8. At yesterday's close, the pair was
quoted at 1.2285. Continuation of the greenback's bullish trend may
lead it to a resistance around the 1.22 mark.
The survey by the market research group GfK showed that German
consumer confidence is set to improve to an eight-year high at the
start of the year on strong gains in economic expectations and
willingness-to-buy as the current economic weakness is expected to
be temporary.
The forward-looking consumer confidence index climbed to 9 for
January, the highest since December 2006, from 8.7 in December.
Continuing early gains, the greenback hit an 8-day high of
119.49 against the Japanese yen. Next likely resistance for the
greenback-yen pair may be eyed near the 120.8 region. The
greenback-yen pair was valued at 118.81 when it ended yesterday's
deals.
The Bank of Japan decided to leave its monetary stimulus
unchanged in order to assess the impact of its past massive easing.
The unchanged stance came despite falling oil prices posing a
threat to the central bank's 2 percent inflation target.
The Policy Board of the BoJ voted 8-1 to maintain the annual
pace of increase in the monetary base at about JPY 80 trillion.
Rebounding from an early 2-day low of 1.5681 against the pound,
the greenback rose to 1.5616. If the greenback extends rise, 1.55
is likely seen as its next resistance level. The pound-greenback
pair finished Thursday's deals at 1.5665.
The U.K. budget deficit narrowed in November, yet a considerable
improvement is required to meet the government's fiscal target for
2014/15, according to the Office for National Statistics.
Public sector net borrowing excluding interventions declined by
GBP 1.6 billion from last year to GBP 14.1 billion in November.
Having fallen to a 2-day low of 1.1566 against the Canadian
dollar at 12:00 am ET, the greenback bounded back with pair trading
at 1.1598. At Thursday's close, the pair traded at 1.1574. The
greenback is poised to test resistance around the 1.175 mark.
Looking ahead, Chicago Federal Reserve Bank President Charles
Evans is due to open a conference on regional competitiveness in
Chicago at 10 am ET.
The Kansas City Federal Reserve is scheduled to release its
manufacturing index for the region at 11 am ET. Economists expect
the manufacturing index to rise to 8 from 7 in the previous month.
Richmond Federal Reserve Bank President Jeffrey Lacker will take
part in a panel discussing economic outlook in Charlotte, North
Carolina at 12:30 pm ET.
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