Though late trading is expected today, the U.S. Dollar is poised to end out the year more than 12% higher against a weighted basket of its major peers, the strongest gain in nearly 10 years and likely, according to industry analysts, a good indication of what investors are likely to see in the coming year. The last time the greenback performed so admirably was in 2005, with a then gain of almost 13%, and this is only the third time in as many decades when the Dollar has appreciated by 10% or better. The reason for the gain, of course, is the divergence in the path of the Federal Reserve relative to most of its major peers, especially, however, the European Central Bank and the Bank of Japan, both of which are poised to embark on massive stimulus efforts to shore up a struggling economy.
As reported at 7:59 am (GMT) in London, the EUR/USD was trading at $1.2155, a relatively steady pace, while the USD/JPY was trading at 119.645 Yen, a 0.14% gain and on track for the Dollar to gain more than 13%. The U.S. Dollar Index, which tracks the greenback’s value against its peers, stood at 89.979 .DXY.
A Look Ahead
Investors will be watching closely data from the U.S. in the coming year, to determine the timing of a likely Fed rate hike; what will offer the surest clues will be the upcoming release of Federal Reserve minutes. Recent economic data has supported a decision for monetary tightening, and unless the unexpected happens, analysts believe that the first interest rate hike should occur by the mid-point of 2015.