US Dollar, Risk Appetite Trends Tipsy - Where to From Here?
The Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) broke the floor of a multi-week congestion pattern this past week, hinting at a correction from its three-year high. Yet, does the S&P 500's dramatic decline Friday alter the FX market's bearings?
Friday closed out the best month for the Dow Jones FXCM Dollar Index (ticker = USDollar) in a year. Yet, we have seen some vulnerability to the benchmark just this past week as traders size the currency up to the persistent appetite for yield and the dubious time frame for the Fed’s eventual curb on its expansive QE3 stimulus program.
The Euro has been a top performer since mid-May, and gains are expected to continue into the first week of June as policy officials remain divided over the best solution to tackle the region's - or rather, the periphery's - credit crunch.
The Japanese Yen gained ground against its U.S. counterpart even as the Bank of Japan (BoJ) pledged to increase the frequency of its Japanese Government Bond (JGB) purchases, but the pullback in the USDJPY is likely to be short-lived as the central bank carries its easing cycle into the second-half of the year.
The Australian Dollar continues to track monetary policy expectations, with the spotlight on the RBA rate decision and the US jobs report in the week ahead.
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