The US dollar has been rather strong lately, being the second best performer on the Forex market last week. Can the currency continue its amazing performance this week?
The most important factor contributing to the strength of the greenback is the probability of an interest rate hike this year, perhaps even as early as September. Some experts point out that the Federal Reserve talked about slow pace of rate increases, and an early hike gives more room to tighten the monetary policy slowly. Yet many market participants still doubt that the Fed would act so early. Nevertheless, the prospects for tighter monetary policy are likely to support the currency.
The problem is that this weekâs economic calendar is light on any major reports. And without supportive news the dollar may have troubles keeping its upward momentum as profit-taking kicks in. There are also signs that the situation around Greece improves as Greek banks reopened today after being closed for three weeks. The news alleviated fears among investors, reducing demand for safe currencies. And this is not good for the US currency, which is perceived to be a safe asset.
Despite these considerations, most analysts remain fairly bullish on the dollar. DailyFX said:
Left to its own devices, the Dollar can certainly drift higher.
Forex Crunch predicted that the US currency would rise against all major counterparts with the exception of Great Britain pound, which itself is supported by prospects for an interest rate lift-off.
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