Dollar Gains More Than 1% Against the Yen
The US dollar rose on Monday against the Japanese yen as investors pulled back from bets against the greenback in advance of the Federal Open Market Committee meeting and the G 20 summit scheduled later this week. The dollar vs. yen rate gained slightly more than 1% although gains were limited due to light Asian trading as Asian financial centers were closed for a holiday. The absence of economic data spurred investors to take profits from currencies which rallied against the US dollar last week.
Fed May Start Removing Stimulus Programs
Some Forex experts are speculating that the Fed may announce an exit strategy for quantitative easing. Chuck Butler of Everbank World Markets stated, “There are some thoughts in the markets that the (FOMC) might announce that they’re going to start removing stimulus. That’s why the dollar is a little bit stronger. I don’t think this is any trend reversal of what we’ve seen from March on. This could just really be a correction. Last week’s run-up (in other currencies) was huge.” Last week the Aussie and Kiwi dollars were big winners but gains have been pared in advance of the FOMC and G 20 meetings.
FOMC Expected to Keep Rates Low
Despite speculation the FOMC is expected to keep rates at their present level but Forex markets will be watching for signs of the Fed’s exit strategy. In New York the ICE futures, which tracks the greenback against a basket of major currencies, rose 0.4% to 76.746 DXY the highest since September 10th 2009. The US dollar benefited from lowered risk sentiment due to a decline in the FTSEurofirst 300 index which fell below 1,000. The FTSEurofirst 300 index tracks the performance of Europe’s largest 300 companies by market capitalization.
Caution Ahead of G 20 Summit
Investors are also cautious in advance of the G 20 summit on Thursday and Friday in Pittsburgh. Boris Schlossberg of GFT Forex said that rhetoric in advance of the G 20 meeting promoted profit taking in risky assets and any future regulation of capital markets could spark a rise in risk aversion.
