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THE TAKEAWAY: After gapping higher on Monday of this week, the US Dollar Index ended the week largely flat as the Yen gained and the Euro fell on Italy’s inconclusive election.
The US Dollar gapped higher against the Yen on Monday this week as newswires reported that Haruhiko Kuroda was the most likely candidate to be named as head of the Bank of Japan. Haruhiko Kuroda backs Prime Minister Shinzo Abe’s agenda to take the nation out of the previous decades of economic gloom. Being an advocate for inflation targeting and monetary easing, Kuroda speculation saw the Yen gap slightly weaker against the Greenback.
The Yen, usually used as the funding currency for carry trades, then gained as the week went on sending the Dollar lower as the Italian election proved inconclusive prompting investors to take some risky bets off the table. A brief mid week rally in the Greenback came as a result of Ben Bernanke reassuring investors that the Federal Reserve Bank has an appropriate plan to wind down stimulus.
The so called ‘safe haven currency’ weakened into Friday of Asian trade as the Euro regained some momentum on the back of a more positive Euro-zone outlook from the ECB President Mario Draghi. Finally, some strong US data which saw jobless claims fall by 22,000 to 344,000 last week and GDP growth of 0.1% in the 4th quarter sent the Dollar higher as confidence improved in the world’s largest economy.
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Source: Daily fx
