The US Dollar Reverses Recent Declines

Late in the session on Thursday the US dollar reversed course and regain a good deal of its recent declines. In the Asian session on Friday the dollar continued its rally adding 9 points to reach 99.17. After two weeks of gains the dollar dipped after the FOMC minutes released on Wednesday evening. The take away from the minutes indicated the pace of interest rate hike will be slow. This acted as a negative factor for the US Dollar Index as investors realized that the minutes included more disagreement about the timing than investors had expected. Global markets are trading with mixed sentiments as investors are still unsure about the pace of US rate hike as Fed minutes released on Wednesday suggested that increases will be gradual.

The euro kept pace with the dollar falling 19 points in the morning to trade at 1.0715 after the ECB report and continued prodding from Mario Draghi is preparing the markets for a massive stimulus program to be launched at their December 3^rd meeting.  Euro strengthened by 0.7 percent on Thursday after the release of Eurozone Current Account data that showed a surplus of €29.4 billion.

Contributing further was the weakness seen in the US Dollar Index after the disappointing release of meeting minutes. Moreover, Greece and its international creditors have reached upon an agreement to unlock about $13 billion in loan money thereby providing further support to the shared currency. However, sharp gains were restricted as the terror attacks and bombings in Paris have sent shock waves around the world and hurt market risk sentiment in the process. Investors still remain apprehensive to make any new bets after the recent bomb-blast scenario in France which could hamper the tourism sector and retail sales of Europe.

In Asia this morning the kiwi and the Aussie both traded in the green even though the US dollar traded on a positive note. The Aussie gained 1 point after a strong rally on Thursday moving closer to the 0.72 level after looking to fall below the 0.70 level just days ago. While the rally is partly about the US dollar, for the most part it seems that investors are re-appraising the universal bearishness that they held for the Aussie dollar just a few weeks ago. The Aussie rally has been remarkable this week when you consider that iron ore has continued to crash, that copper marked another 6-year low.

The kiwi outperformed the Aussie gaining 19 points to 0.6585 as traders are looking ahead of the next central bank meeting. Graham Wheeler governor of the RBNZ will review the official cash rate on Dec. 10, a week before the Fed’s meeting, and it is expected he will cut rates next month to shore up the economy against extended weakness in dairy prices rather than wait until the next full monetary policy statement in March.

The Japanese yen is steady in the morning session ahead of the Bank of Japan account. Yesterday the BoJ left is rate and monetary policy on hold as many had expected but there were hopes that the bank would help the Japanese economy out of its recession with more stimulus. The yen is trading against the dollar at 122.91 and against the euro at 131.69.