The US dollar rallied this week as the Federal Reserve disappointed Forex market participants who expected a third round of quantitative easing. QE was priced in and its absence moved the currency higher.
Many market analysts were pretty sure that the US central bank would announce QE3 this month. They were very frustrated when the Fed failed to do that. The bank extended its Operation Twist till the end of the year, but even that was a disappointment as economists thought that the asset purchase program would be prolonged for a more significant period of time. QE3 is not out of question still, but for now the dollar is relieved from the pressure of stimulus expectations.
News from other parts of the world was also supportive for the greenback. Signs of economic slowdown, disagreement among European leaders — all that supported appeal of the US currency as a safe haven. The dollar outperformed the yen, another safe currency, which was unusually weak over the last five days.
EUR/USD fell from 1.2694 to 1.2567 and GBP/USD declined from 1.5703 to 1.5586. USD/JPY advanced from 78.79 to 80.39, while its weekly high of 80.56 was the highest since May 2.
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