The dollar reached a three week high against the yen Friday and held steady against other currencies. It was attributed to the gains of US bond yields this week. The bad news is that it fell against the euro as European Central Bank policymaker Ewald Nowotny said he didn’t see any reasons to cut interest rates. The policymaker made his statement after surveys showed euro zone activity going up at a much faster rate.

The dollar increased 0.2 percent to 98.95 yen. It reached a three week high of 99.14 on EBS. But the dollar dropped at $1.3365 against the euro. Analysts said that the euro is irrepressible at the moment but the Fed normalization story will go in favor for the dollar.

The euro had a six month high of $1.3453 earlier this week. It was due to the positive euro zone economic data. The German domestic product data showed that Europe’s biggest economy grew by 0.7 percent in the second quarter. This was helped by domestic demand.

The recent improvement has pushed the euro zone money market rates higher. It could challenge the pledge made by the ECB to keep rates low until a full recovery is seen if the pick-up is sustained. The euro hit a one month high against the yen at 132.34 yen. It was last trading at 132.15 yen, which is up 0.2 percent.

The focus is now on Federal Reserve Vice Chair and policymaker Janet Yellen, who is set to speak at the Jackson Hole symposium on Saturday. The dollar index remained at 81.513 but has gained for the week. Yields got a boost this week after the release of the minutes of the Fed’s July meeting. People are still speculating that the Fed will begin pulling back its stimulus program as early as September.

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