The U.S. Dollar Index held close to a 2-week trough during the Asian trading session with recent gains being chipped away on growing speculation that the Federal Reserve Bank won’t make any significant changes to its quantitative easing policy. Last week’s disappointing private sector labor data seems to have been the impetus for the markets’ collective change of heart, with most investors now expecting that the Fed will likely begin tapering by only about $10 billion a month beginning this month, but that the tone will remain primarily dovish. A recent survey of economists mirrored investors’ expectations of a modest scale back of the Fed’s asset purchasing program.
The U.S. Dollar Index, used by investors to gauge the greenback’s strength against major rivals, fell to 81.445 .DXY in the overnight hours before edging up to 81.518 .DXY; last week the Index slipped more than 1% from the recently struck 7-week high.
Fed Tapering Speculation Helps Commodity Currencies
Commodity-linked currencies got a boost, however, with the EUR /USD pair edging to a session high of $1.3325, a level unseen since late August, before slipping back to $1.3309. The Euro’s selloff, which followed dovish comments made by the ECB last week, has now been fully reversed. The NZD/USD pair struck a 4-week peak and traded at $0.8137 while the AUD/USD struck an 11-week high, trading at $0.9324.