Dollar Under Pressure - 12.12.2012
The US dollar got under pressure vs. the majority of liquid currencies, not waiting for the FOMC meeting end. It seems like market participants have doubts melting down concerning the CB decision to prolong the assets purchasing program in order to support economic growth. According to estimates, the program volume may be $45 bln a month or even more. In this regard, the dollar index fell down to 80.00, however it does not get any lower yet (see the chart)
US dollar index, daily chart
Euro, British pound and Swiss franc are trading in narrow ranges vs. US dollar today, however it is worthy to note the currencies strengthening in the previous two days. Thus the British pound is approaching the highest level for 6 last weeks at 1.6130 and the euro rose slightly above 1.3000.
In terms like this, when the largest central banks are easing monetary policies (that may be expected from the FED, BOJ and ECB in the short-term perspective), it would be reasonable to focus on the higher-yielding liquid currencies. First of all, we are talking about AUD, NZD and CAD.
Generally, strengthening in these currencies mentioned above is not a surprise, but right now, the Australian dollar is coming close to the upper boundary of the trading range (1.0148-1.0624), prevailed in the last 5 months. The New Zealand dollar is close to a 15-month high at 0.8470 and the Canadian dollar rose this morning to a 3-week high. The chart below shows the return dynamics for all three currencies vs. the US dollar over the past two months.
AUD, NZD, CAD