Wednesday, March 14, 2012

Dollar Continues Rally

Following no monetary policy changes from the FED at yesterday's FOMC Meeting, the Dollar has continued to rally.  Dollar bulls are being encouraged by the central bank's lack of mentioning any hints to an upcoming quantitative easing program.  As a result, the USDJPY has hit an 11 month high and the EURUSD has traded to a one month low.  Also, prices of Gold have fallen as worries of an escalation in US inflation has been removed.

U.S. 2-year Treasury yields hit a 7-1/2-month high after solid retail sales data, making the dollar less attractive to fund investments in higher-yielding assets. Tokyo exporters were also reluctant to sell it now, expecting more strength, traders said.
These factors saw the dollar hit a high of 83.41 yen in European trade, its highest level since mid-April to trade up around 0.7 percent for the day. Traders said key resistance was last year's high of 85.53 yen.
Recent easing steps by the Bank of Japan and the country's trading deficit amid surging demand for fossil fuels in the wake of the nuclear crisis have also helped the dollar, which has risen 9 percent to the yen since the beginning of February.
"We have revised our dollar/yen forecast up to 90 in six months and think it will stay there until twelve months from now," said Raghav Subbarao, currency strategist at Barclays Capital.
Barclays' previous forecasts were for dollar/yen to be at 82 in six months and 84 in a year.
The U.S. unit gained also against all other currencies, with its index hitting its highest in nearly eight weeks of 80.435 .DXY. Read More
 Coming up later today, the FED will continue to be in focus as FED Chairman will be speaking at a Banking Convention, at 10:00 am EST.

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