No QE3 from Fed Means Weekly Gains for Dollar
The US dollar rallied this week as the Federal Reserve disappointed Forex market participants who expected a third round of quantitative easing. QE was priced in and its absence moved the currency higher.
Many market analysts were pretty sure that the US central bank would announce QE3 this month. They were very frustrated when the Fed failed to do that. The bank extended its Operation Twist till the end of the year, but even that was a disappointment as economists thought that the asset purchase program would be prolonged for a more significant period of time. QE3 is not out of question still, but for now the dollar is relieved from the pressure of stimulus expectations.
News from other parts of the world was also supportive for the greenback. Signs of economic slowdown, disagreement among European leaders — all that supported appeal of the US currency as a safe haven. The dollar outperformed the yen, another safe currency, which was unusually weak over the last five days.
EUR/USD fell from 1.2694 to 1.2567 and GBP/USD declined from 1.5703 to 1.5586. USD/JPY advanced from 78.79 to 80.39, while its weekly high of 80.56 was the highest since May 2.
If you have any questions, comments or opinions regarding the US Dollar, feel free to post them using the commentary form below.
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Dollar, EUR/USD, Federal Reserve, GBP/USD, Quantitative Easing, Safe Haven, United States, USD/JPY
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Earlier News About the US Dollar:
- US Dollar Falls Back as Traders Find Optimism (2012-06-22)
- US Dollar Holds Its Own (2012-06-21)
- US Dollar Drops as Risk Appetite Returns to Markets (2012-06-19)
- US Dollar Higher as Uncertainty Grows (2012-06-18)
- Dollar Suffers from Bad Fundamental Data (2012-06-15)
2 Comments
Giving the fact that QE3 is not entirely ruled out, what would your expectations be regarding currency pais such as the EURUSD, AUDUSD, GBPUSD, USDCHF etc
For now the dollar is likely to remain stronger against most currencies. Except, perhaps, the yen, which was unusually weak over the past week, but often tends to outperform the greenback. Yet there will be EU summit this week and if traders will be happy with its outcome safe currencies, including the US dollar, would weaken.