The US dollar fell this week versus most of the major currencies despite the continuing debate regarding the Fed’s tapering stimulus programmes and when it will take effect following the rather unsatisfactory report a week prior.
Curiously, the yen tumbled earlier this week which led to its losing a foothold on Japanese stocks that rallied after Tokyo’s winning bid to be the 2020 summer Olympics host which further upgraded its second quarter economic growth while the euro was lifted on a much better Eurozone sentiment data.
However, the slower than anticipated US job growth last month hit a 4 1/2 year low as it continued to put weight on sentiment despite the dollar’s reluctance in undergoing the mauling it took this week. On the other hand, the Euro went up 0.2 % against the dollar and the latter gained 0.3 % against the yen. The dollar index declined 0.2 % earlier this week which catapulted a 0.6 % extension by the end of the week.
Expectations were high regarding the Fed’s announcement on a tapering of its monthly bond purchases starting this month in accordance to a policy meeting that buoyed the dollar in recent weeks are largely responsible for the 2.8 % increase in the dollar index this year. A diminution of the stimulus will predictably lift US Treasury yields and augment additional appeals of dollar-denominated assets in the future.
Whereas the Euro is heavily supported by the positive Sentix data, investors and the likes are also keeping a good eye on Rome where the Italian Senate is expected to start a debate on whether to banish it former premier from parliament. If this should ever happen, it could adversely threaten the nation’s ruling action. In addition, an ominous German general election is said to keep a watchful eye of the euro.
Summer Olympics 2020
The dollar’s profits were announced against the yen. The Olympics winning bid of Tokyo is invariable to a boost for the Japanese economy and a possible shot to re-inflate the economy after several decades of sub-par growth and deflation.
The Tokyo’s bidding committee estimated that the Olympics would boost the economy by a predicted $30 billion over the next seven years. This projected gain boosted the Nikkei, which jumped to a five-week high as the yen has an inversely proportional relationship with Tokyo shares, this in turn resulted in the currency to slip. The yen is considered a safe-haven currency which tends to shift in the opposite direction to the riskier side of the continuum.
Both the dollar and the euro were able to gain more than 14 % of this year’s profits against the yen as the Bank of Japan embarked on a massive monetary stimulus programme during the early parts of the year.
Still, the yen’s weakness could be a momentary with investors becoming wary regarding the highly probable U. S. -led military strike against Syria which could lead to a fresh safe-haven inflows.
In other news, the Australian dollar was able to hit a three-week spree at $0.9224 which was a result from the benefited data by the Chinese. It is noted that that China is Australia’s largest export market. Finally, the Aussie last stood at $0.9204 which was up 0.2 % which barely responded to the recently concluded national election.