USD strengthened by FED statement

The dollar strengthened Friday morning and held firm against a basket of currencies, DXY, after a Federal Reserve (FED) official had indicated that FED may begin to taper its bond buying known as monetary easing already this summer. In a statement on Thursday the President of FED, in San Francisco, indicated that the Central Bank might ease back on the monetary gas pedal and end bond buying by the end of the year. His indications immediately led to a rise in the dollar with DXY up 0,4 % and nervousness in equity markets.

 Analysts see a stronger dollar being prominent over the next months’ currency developments. The Euro/USD fell to 1.2860 and depreciation of the Japanese Yen continued. USD/JPY trades at 102,31. The dollar is likely to gain, particularly against low-yielding currencies such as Euro, Yen, GBP and Swiss Franc. In spite of conflicting macroeconomic signals from the US over the last few days, consensus among analysts seems to be that the US economy is holding up much better than that of the rest of the world. A strong US recovery strengthens the dollar lower yield currencies and gold.

 There are, however, mixed signals. Numbers presented on Wednesday showed the US industrial production at its lowest level in 10 months. Data on Americans filing new jobless claims climbed last week at its fastest pace in six months, up 32,000 to a seasonal adjusted 360,000. The highest jump since November. The increased jobless claims came amidst signs of slower last quarter US-growth, due to the Federal government’s austerity drive with a hike in taxes in January and sweeping budget cuts in March.

 The number of jobless claims stand in stark contradiction to last month’s 165 000 newly added jobs, and the drop in the unemployment rate to a four year low at 7,5 %. Stock markets were nervous yesterday. Wal-Mart, the world wide hypermarket store, presented quarterly earnings below Wall Street expectations. Stock prices fell 2 %. Good quarterly results from the technology sector and especially CISCO counterbalanced. The Asian Pacific MSCI-index fell 0,3 %.

 Gold at USD 1379 is striving to keep above the four-week low on 1369 reached on Thursday. A Credit Suisse forecast predicts a 20 % fall in the price of gold during the next twelve months. Oil prices are steady with Bren trading at USD 103,64 a barrel.

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