The USD is always a leader in forex news because of its world position. It is still the currency held in reserves. It is still the currency with more pairings than others. It makes it a big player to keep your eyes on even if you intend on trading non USD pairings like the AUD/JPY. News regarding the USA and its currency can drastically change FX rates particularly the trends these rates might be on. Seeing the dollar being bought instead of sold has helped against its 7 month low. The German election ending on the weekend has been a focus for the euro. Additionally, the news is showing the USD gained in value against the JPY providing a one week high after the huge sell off it has undergone in recent months.
Reading FX Rates on News of Stimulus
Thursday announced the meeting results for the Fed talks about monetary policy and easing off the stimulus. The actual results tanked FX rates for the USD putting it at a 7 month low. Yet, on Friday talkers changed their position and it seems many listened to this Friday announcement. It could be nothing but trying to get the dollar out of its losses, but some officials stated the stimulus reduction might be closer than the Thursday announcement led many to believe.
President James Bullard was the most important speaker on the stimulus. He firmly believes the stimulus cutbacks will happen and quicker than many think. Esther George of Kansas did not agree with this statement and feels the central bank is risking its credibility with all the different talk. Many want to see cutbacks on the stimulus because of the change it will make to the USD value. By cutting back the USD in the market it means making the dollar stronger, which is why Friday’s announcement of possible tapering happening sooner than many think helped FX rates increase for the USD. The thing is you have to be wary of talk. Prior to the Fed meeting and the announcement no cutbacks would happen in 2013 many positively felt it would occur. The announcement created a 7 week low for the USD. Now there are two people arguing in the media that it will and won’t happen. Most seem inclined to agree it will happen although the realisation is probably not in 2013 but earlier in 2014 than originally projecting, thus helping USD FX rates.
The Euro and Yen FX Rates
In other news, the euro lost a little of its gain with the yen. The EUR/JPY was at 134.94 in a four year high for Thursday; however, it went to 134.31 on the close Friday. The yen is most likely going to continue its loss against other major currencies. If the USD can rally the FX rates for the USD/JPY will start to favour the USD again. The yen has been a safe haven for USD investors, and performed against the EUR in a basic pattern of loss given Japanese news.