Dollar’s Rise Halted by Outlook Solid

The U.S. Dollar slipped from a recently struck 3-year peak but analysts expect that it will continue to strengthen in the longer term on growing expectations that the Federal Reserve Bank stands poised to curtail its existing asset purchase program. Since mid-May, the greenback has appreciated some 5%, and market players believe that this small correction was a result of a rally that came on too strong and too fast. Tomorrow’s release of the Fed’s most recent minutes are likely to be the determinant for the U.S. Dollar in the short term, however and the results of a poll of economists revealed that the likelihood is that the U.S. central bank will begin tightening policy as soon as September, sharply contrasting the expected policies of both the Bank of England, Bank of Japan and the European Central Bank.

As reported at 11:38 a.m. (JST) the U.S. Dollar Index slipped 0.2% to trade at 84.267 .DXY, moving away from the 3-year high of 84.588 .DXY. Since Friday, the Index, which is viewed as a measure of greenback’s relative strength, has rallied about 1.5%. The EUR/USD traded at $1.2866, a gain of 0.3% but still within striking distance of Friday’s 7-week low of $1.2805; gains for the Euro are likely to be limited as recent data, including export data from Germany, suggested that the Eurozone’s economic driver is feeling the pressure.