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U.S. Dollar Set to Finish Week with Solid Gains

By:
James Hyerczyk
Updated: Nov 13, 2016, 08:24 UTC

The U.S. Dollar is expected to finish the week with solid gains against major currencies such as the Japanese Yen and Euro and a pair of minor currencies

U.S. Dollar Set to Finish Week with Solid Gains

The U.S. Dollar is expected to finish the week with solid gains against major currencies such as the Japanese Yen and Euro and a pair of minor currencies such as the Chinese Yuan and Mexican Peso. All of the price gains can be tied to the policies of newly elected President Donald Trump.

Trump’s promise to boost public spending and put tariffs on cheap imports have driven U.S. Treasuries yields higher this week on expectations of inflation and the need for more frequent rate hikes by the U.S. Federal Reserve.

There are some doubters, however, as to whether the strong upside momentum by the dollar will carry into next week. These traders believe that this week’s action was only a knee-jerk reaction to unexpected news that shocked the financial markets. Those who support Trump’s policies are saying that this is just the beginning of the next rally by the dollar.

At the end of the week, China fixed the Yuan at 6.8120 per dollar and the Mexican Peso hit a record low of 20.89 per dollar. The USD/JPY was set to finish the week with a more than 3 percent rise.

The fast pace of the dollar’s gains against the Japanese Yen did not go unnoticed, however. It even surprised Japan’s Finance Minister Taro who said, “It is exceptional for the yen to move 5 yen (against the dollar) in two days.” The statement reflected his concerns over the importance of market stability.

U.S. Equity Markets

U.S. stocks whipsawed between gains and losses on Friday as investors took a breather after two days of solid gains. Investors may have used today’s U.S. bank holiday as an excuse to take a break from the frenzied trade that had been the theme earlier in the week. Despite today’s setback under thinly traded conditions, the three major indexes are poised to record their best weekly gains of the year.

Since Donald Trump’s unexpected victory on November 8, portfolio managers and investors have been quickly reallocating funds into stocks expected to benefit from his economic policies. The winners include the financials and industrials. The losers are interest rate sensitive stocks like utilities, real estate and consumer staples.

U.S. Economic News

It was a light day for news on Friday. Consumer sentiment for November came in at its highest level since June, posting a read of 91.6 versus an estimate of 87.4.

FOMC member and Fed Vice Chairman Stanley Fischer said the case for removing accommodation is “quite strong” while interest rates will plateau at a level that is lower than normal. He added that he expects U.S. rates to rise gradually, and said the Fed is close to achieving its dual mandate of 5% unemployment and 2% inflation.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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