Forex Market Update: Dollar Still Broadly Higher but Rally Pauses
The U.S. dollar index recoiled from its two-week high on Friday but was still on course to log its best weekly performance in last 12 months as global investors sought safety in the U.S. dollar amid rout in riskier assets.
Investors sold riskier assets and even treasuries, in hordes, after the Federal Reserve signaled at possible scaling back of its multi-billion dollar asset purchase program by the year-end, earlier this week.
The dollar Index, a gauge on U.S. unit’s performance against a basket of six major traded currencies, slipped to 81.816 on Friday from 81.145, which was its two-week high. For the week, the dollar index is still gaining 1.4%, showed a data provided by Reuters.
The dollar’s rally paused on Friday as speculators chose to book profits.
However, the euro is still trading sharply lower against the U.S dollar. At last check, the euro fell 0.35% against the USD to trade at $1.3173.
Several factors are weighing on the euro. Some peripheral economies of the euro zone have seen their bond yields soaring lately while interest rate differentials are also favoring the U.S. dollar.
Moreover, concerns over political stability in Greece have resurfaced yet again which in turn could keep investors wary of the single currency.
“I see a continuation of the trend of a stronger dollar. An improved set of U.S. macro fundamentals and likely tapering (by the Fed) by the end of the year will benefit it,” said Neil Jones, who is head of hedge fund FX sales at Mizuho Corporate Bank, according to Reuters.