FOREX_US_Dollar_higher_after_BoJ_announcement_and_strong_data_body_rewindjan25.png, FOREX: US Dollar higher after BoJ announcement and strong data

THE TAKEAWAY:Euro worries and the BoJ announcement saw a volatile US Dollar early in the week but strong data from China and the US saw the Dollar higher as the week came to a close.

Friday of last week saw some weak Italian data weigh on the Euro which had investors buying the US Dollar as a safe haven from the struggling Euro-zone. As the new week commenced, attention shifted to the Bank of Japan’s meeting and the focus was on whether the Bank would adopt a 2% inflation target and what easing measures would be taken. The announcement came in largely as expected, and given the rally in the Dollar/Yen in the preceding weeks, it was only natural for the dollar to weaken on the anticipated news.

After a sharp decline, the Dollar consolidated some of its losses and then lost more ground as the Australian Dollar recovered after some weak Australian economic data. The Greenback spiked higher after more Euro-zone issues were brought to the surface as the IMF announced it expected the Euro-zone to stay in recession through 2013 after the currency area’s economy contracted 0.2% this year. Markets then eyed the Chinese Manufacturing PMI data which came in better than expected causing the Nikkei to rise and the Yen to lose ground to the Dollar. The USDOLLAR index continued to trend higher as the week came to a close on news that US jobless claims had decreased and that the Bank of Japan had started its planned aggressive easing.