The U.S. Dollar finally edged over the 110 Yen threshold, the first time since 2008, and the greenback also remained close to a 2-year high versus the common currency Euro. The dollar’s rally comes on the back of increasing speculation that economic data could compel the Federal Reserve Bank to begin monetary tightening via an interest rate hike sooner than expected. The markets will be watching for several labor-related data releases including ADP employment change due out today, jobless claims tomorrow and on Friday, this trading week’s main event, the non-farms payroll department from the U.S. Department of Labor. A positive surprise in the reports, say analysts, could force the hands of FOMC policy makers. The likely divergence of monetary policy, given speculation of the Fed rate hike, between the Fed and the Bank of Japan and the ECB are what is driving the Dollar’s recently rally.
As reported at 9:19 a.m. (BDT) in London, the USD/JPY pair was trading higher at 109.90 Yen, a gain of 0.2% but easing away from the overnight peak of 110.09 Yen. Currency strategists believe that positive economic data from the U.S. could lead to a test of the 110.67 Yen resistance level.
Euro Pressure Relentless
The Euro remains under pressure after Eurostat reported that regional inflation fell to 0.3% (annualized) in September, which will certainly lead to increased calls for the ECB to step in with additional stimulus. Given Mario Draghi’s now limited options, that is likely to mean printing more Euros but markets will have to wait for the ECB policy decision which is due out on Thursday. The EUR/USD dipped to a session low of $1.2571 before recouping slightly to $1.2595, however still a loss of 0.3%. In September, the Euro lost about 4% against the Dollar, the largest drop in two years.