NEWS / Foreign Debt

Dollar still on back foot despite sabre-rattling at the Fed.

August 17th - The dollar is clearly remaining under pressure as we approach the latter part of the trading week. Yesterday??™s US numbers offered little inspiration and although Richard Fisher, President of the Dallas Federal Reserve, made some bullish comments overnight regarding inflationary pressures and the Fed??™s willingness to tighten monetary policy further, consensus still seems to be that the currencies of those countries who are just starting to hike rates continue to offer the better outlook. Data out of Japan has shown that foreign commitment to its equities continues to build, having now increased for the fourth consecutive week. Not only does this point to the recovery of Japanese corporates as a whole but it also has a clear impact on currency flows, in turn adding further upside to the Yen. USD/JPY is currently sitting around the middle of the range we??™ve seen traded since the middle of July so further gains for the Yen certainly wouldn??™t cause too much surprise. US weekly jobless claims due later in the session can expect ??“ as always ??“ to be scrutinised and further lacklustre growth here will likely give the market another reason to shy away from the greenback and although we may be some way off the July 10th lows of around 113.50 unless we see a shift in sentiment, the rally in this direction may well now continue.

David Hutchings