The U.S. Dollar’s momentum was stymied during the Asian trading session on Tuesday on expectations of a prolonged QE program by the Federal Reserve with many investors already accepting as fact the likelihood that incoming Fed Chief Janet Yellen will maintain the ultra loose monetary policy which currently exists at least through March 2014. However, recent improvements to the U.S. economy which were showcased by other Fed officials are supporting the minority view. An increase in risk appetite which followed the announcement of widespread reforms by the Chinese government is also helping to keep keeping the greenback range bound.
As reported at 10:55 a.m. (JST) in Tokyo, the U.S. Dollar Index moved away from Monday’s near 2-week trough of 80.565 .DXY and held at 80.729 .DXY; analysts say that any break of 80.923 .DXY which was Monday’s high could help to break this week’s downtrend. The U.S. Dollar Index is used by investors to assess the greenback’s strength against a weighted basket comprised of its major rivals. The EUR/USD pair slipped from yesterday’s 12-day peak of $1.3542 and was trading at $1.3503; last week the Euro essentially recovered from the November 7th 2-month trough of $1.3259 which occurred after the ECB surprised markets by cutting interest rates.
Chinese Announcement Drives Risk
Higher risk and commodity linked currencies got a boost from a global equities rally which reflected newfound optimism for new reforms announced in Beijing late last week. According to the announcement, some 60 different economic reforms will be instituted, all of which together are intended to revitalize the second largest economy in the world by moving from an export-oriented economy to a consumer-driven one.