European currency
markets watched the dollar hold up its recent gains on Friday, after the
rumours of U.S. interest rate increases by September pushed the greenback to
new levels.
The dollar nearly
drew level with the euro in 2015 and the recent gossip coming out of the Fed,
combined with sturdy data reports, has had a positive effect on the currency
markets and resurrected rally hopes particularly among hedge funds.
Currency managers
are proceeding with caution however, especially in an election year, with
suspicion still strong that the slide in the greenback observed since the first
quarter have been affected greatly by politics.
Most experts have been disheartened recently
by the dollars failure to gain, and data from this week shows the currency
markets now betting it will go in the opposite direction.
“A long greenback position is popular with
investors, even today,” said Jonathon Price, Director of Mergers &
Acquisitions at Nikko Holdings, “The reason is not because the monetary policy
gap is not there, it is, but too many investors have been burnt in the past.”
Nikko Holdings have preferred to back the
dollar against Asian currencies rather than its basket peers. “We are confident
the dollar increase will no longer be against the usual suspects who have used
their central banks to weaken through easing methods and negative interest
rates. We see what happened with the yen in the first quarter,” Price added
The figures for the dollar were stable at $1.1221
following a recent high on the euro zone trading floors of $1.1207 and up 0.2
percent on the .DXY, its measuring stick against its major competitors.
Japanese bank trader sentiment points
towards a steadier pace for a greenback rise against the yen mainly due to the
ability of the nation’s exporters to sell the currency.
The news will
please Japanese economic authorities who have been panicking lately over the
yen’s strength and the knock on affect to the economic recovery of the country.
These subjects are more than likely to be a
major talking point at the Group of 7 summit due to take place in Japan at the
end of the week. The meeting for the worlds most advanced economies could be
prickly on the dollar/yen situation and there may well be divided opinion over
a spectrum of peripheral issues also.
There is expected to be some opposition to
Japanese monetary easing, especially from the U.S.
