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FOREX-Dollar touches 11-month high vs yen, gains vs euro
March 14, 2012 / 12:57 PM / 6 years ago

FOREX-Dollar touches 11-month high vs yen, gains vs euro

* Dollar strengthens broadly on seemingly less dovish Fed
    * Investors contrast Fed with BoJ

    NEW YORK, March 14 (Reuters) - The dollar hit a fresh
11-month high against the yen and a new one-month high against
the euro on Wednesday after the Federal Reserve
upgraded its economic outlook on Tuesday amid a
string of U.S. data reports that indicate a firm recovery. 	
    U.S. two-year Treasury yields reached a 7-1/2-month high
 after solid retail sales data on Tuesday,
making the dollar less attractive to fund investments in
higher-yielding assets.	
    The 1.1 percent rise in U.S. retail sales added to signs of
a pickup in the world's largest economy after another
encouraging monthly jobs report last week, the third in a row.	
    Acknowledging the trend, the Fed slightly upgraded its
outlook, expecting "moderate" growth over coming quarters and a
gradual decline in the unemployment rate, although it said the
jobless rate remained elevated. 	
    Recent monetary easing steps by the Bank of Japan and that 
country's record trading deficit powered by demand for fossil
fuels have also helped the dollar, which has gained around 9
percent against the yen since the beginning of February.	
    The dollar's "bullish movement has re-accelerated following
the most recent FOMC and BoJ meetings, where the latter is
expected to continue to loosen monetary policy as the former
remains on hold for the time being," said Eric Theoret, currency
strategist at Scotia Capital in Toronto, referring to the Fed's
policy-setting Open Market Committee.  	
    The dollar rose as high as 83.65 yen, its highest
since mid-April. Traders said Japanese exporters were reluctant
to sell the dollar and anticipated further strength. The dollar
has advanced 8.6 percent against the yen in 2012 to date and
analysts are raising their forecasts.	
    "We have revised our dollar/yen forecast up to 90 in six
months and think it will stay there until 12 months from now,"
said Raghav Subbarao, currency strategist at Barclays Capital in
    Barclays' previous forecasts were for dollar/yen to be at 82
yen in six months and 84 yen in a year.	
    The euro struggled against the dollar, falling to a
one-month low of $1.3028 after triggering stop-loss orders below
support at $1.3054, around the 50 percent retracement of a Jan.
16-Feb. 24 rally. It later recovered to $1.3067, down 0.1
percent for the day.	
    Further support for the euro loomed at the next major trough
on daily charts at the Feb. 16 low of $1.2973.	
    Further boosting sentiment, the Fed said most of the largest
U.S. banks passed its stress tests, bolstering strong gains on
most stock exchanges.  	
    Jens Nordvig, global head of FX strategy at Nomura, said the
European Central Bank's long-term cash injections into European
banks (LTRO) had also changed euro/dollar's trading dynamics.	
    "In a way, the euro is the new dollar, with potential to
become the favorite funding currency in global capital markets,"
he said.	
    The euro zone common currency strengthened against the Swiss
franc, however, rising to a peak of 1.2117 francs, its
highest since Feb. 8, before a Swiss National Bank rate decision
on Thursday. 	
    Although economists polled by Reuters expect the SNB to
stick to its euro/Swiss floor at 1.20 francs and keep interest
rates at zero, there have been calls for the bank to raise the
floor. The euro was last at 1.2102 francs. 	
    The Australian dollar also dropped against its U.S.
counterpart, touching a fresh seven-week low of US$1.0456. It
was last at US$1.0463, down 0.8 percent.

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