WSJ: Dollar Resumes Rally Against Major Currencies
The U.S. dollar Monday resumed its rally against a number of currencies, still driven by the diverging monetary policy paths of the Federal Reserve and other central banks—especially in Europe.
By midmorning, the buck was trading 0.6% higher against Japan’s yen and up 0.4% against the euro, edging toward the nine-year high hit last week, on expectations that the European Central Bank will this month announce a broadening of its asset purchase program while the Fed prepares to raise rates.
The dollar also added 0.3% against the British pound as the latter continued to be pressured by weak economic data, that some say may jeopardize the timing of a hike in interest rates in the U.K.
Some strategists said that selling the euro has become such a popular trade in recent weeks, that the investors are now looking for other currencies to sell against the dollar.
Currency strategists at National Bank of Australia added in a note that “political risk” is also playing a major role “with consumers weary of the whole electoral process” that will culminate at the general election in May.
Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., meanwhile, said the announcement from Shire PLC over the weekend, that it is buying NPS Pharmaceuticals Inc., a maker of treatments for rare diseases, for $5.2 billion, could also be accentuating the move.
The U.K annual inflation data for December is expected to come in at 0.7% on Tuesday, which would represent the first time since June 2002 that price growth has slipped more than a percentage point below the Bank of England’s 2% target.
Last week, a survey showed that business activity in the U.K.’s dominant services sector sputtered in December, adding to signs the economy slowed at the end of 2014.
In equity markets Monday, European stocks rose, bouncing back from a sharp selloff spurred by fears that the ECB’s expected asset purchase program might be smaller than investors hope, as well as a fresh slide in the price of oil.
By midmorning, the Stoxx Europe 600, having closed the previous session 1.3% lower, was 1% higher. Germany’s DAX 30 and France’s CAC 40 added 1.5% and 1.6% respectively.
Even London’s FTSE 100 added 0.5%, brushing off a fresh slide in the price of Brent crude to around $48.70 per barrel, taking losses for oil over the last six months to more than 54%. Gold was 0.4% higher at $1,221 per troy ounce.
In the U.S., the S&P 500 was indicated opening 0.5% higher. Futures, however, don't necessarily reflect moves after the opening bell.
