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Greenback Surrenders Gains After Jump to Fortnightly Highs

Greenback Surrenders Gains After Jump to Fortnightly Highs

Many who have backed the greenback in the past week have cut and run today, prompted by a mediocre performance in the markets Wednesday and a slip in the dollar’s gains versus its basket currency peers.

Paris, France, June 30, 2016 — The dollars drive, a recovery from severe lows at the start of the month, was slowed by the yen, which added 0.5 per cent and the euro which gained over 2 per cent.

Although a volley of announcements by Japanese economic officials threatening to intervene may have been a force that slowed the greenbacks recovery, many experts say a more influential factor was the general sentiment of reluctance to push the dollar down versus the euro and pound at a time when the United States economy looks in far better shape than any of its world competitors.

However, following New York Federal Reserve President William Dudley’s recent comment hinting at a possible two interest rate hikes this year, United States debt yields have continued their decline which has weakened the major argument for any further dollar rally.

“What we need is one more greenback push in order for us to sell the currency against its basket peers. Instead we’ve seen over the past week a very placid dollar” said Steve Rogers, Director of Asset Allocation at Orix Capital Trading via an email to investors. “We still see a clear lack of investment in the American economy,” he added.

The greenback drifted away from its two-week high overnight, the dollar index slipping 0.3 per cent to 94.109 compared to the 94.396 high. Its performance versus the yen showed a 0.4 per cent decline at 108.68 compared to a fortnight of climbs to a high of 109.46 yen in the Asian markets early on.

Rogers explained in the email that sentiment among investors was that there are domestic issues, most notably the presidential campaign, which will add to current global factors giving the Fed second thoughts regarding interest hikes this year.

Experts think Japan, usually a safe bet for investment capital over the last decade, may be in for tough times as a 13 per cent gain in the yen which has sparked threats by the government to intervene, may not see direct action by the authorities until after the Group of 7 meeting later in May, if ever.

Koichi Hamada, an adviser to Prime Minister Shinzo Abe said last week that changes may be forthcoming even if the U.S. is not happy about it.

Ichiro Hoshi
Orix Capital Trading
Tokyo, Japan

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