US dollar is higher today, at one point reaching a new eight-month high against the euro. Thanks to the perception that the Federal Reserve is becoming hawkish, the greenback is gaining ground as Forex traders expect tighter monetary policy.
The Federal Open Market Committee is in the midst of a two-day meeting, and many expect that tomorrow Janet Yellen will announce another $10 billion cut to its bond buying program. Additionally, there is speculation that a hint of when interest rates might move higher (sooner rather than later) will also be revealed.
Many Forex traders see the improvement in data out of the United States as a driver toward tighter monetary policy. That would strengthen the US dollar, especially against its major counterparts that aren’t ready to tighten. Policy divergence is one of the main reasons that the greenback has been enjoying strength lately — especially against the euro. As long as the Fed appears to be on the verge of hawkishness, the greenback is likely to head higher.
At 15:12 GMT US dollar index is up to 81.1920 from the open at 81.0060. EUR/USD is down to 1.3414 from the open at 1.3439. GBP/USD is down to 1.6944 from the open at 1.6983. USD/JPY is up to 102.0545 from the open at 101.8600.
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