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Asian Session – US dollar continues to correct on worries about timing of Fed tightening

Posted on March 23, 2015 by the XM Investment Research Desk at 7:15 am GMT

us-revenues-leaped-28The US dollar remained weak during Monday’s Asian trading, as euro / dollar was trading above the 1.08 mark (at 1.0810) and dollar / yen dropped below 120 to around 119.85.  There were still worries that the Fed would take a more relaxed approach to monetary tightening, which reduced the greenback’s allure.  This was the result of Wednesday’s Fed meeting, during which the Fed downgraded its forecasts for inflation and economic growth, while also pointing out the negative effects of the dollar’s rise on the country’s export sector.

The euro was not without its own challenges however, as the Greek debt crisis as well as the ECB’s Quantitative Easing program were weighing on the single currency.  Traders were expecting a key meeting between Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel for clues on how the situation would progress.  A parliamentary testimony by ECB Chief Mario Draghi was also going to be closely watched.

Most traders remained of the opinion that the dollar’s correction should be bought, as they saw the currency’s up-move eventually resuming after a pause.  The US Treasury Secretary Jack Lew said that a strong dollar was in the interests of the country on Friday.

In Spain and in elections for the local parliament in Andalusia, the traditional parties of Socialists and Conservatives managed to overcome the challenge of non-traditional parties such as the far-left Podemos – ideologically aligned to Greece’s ruling SYRIZA anti-bailout party.  Non-traditional parties such as Podemos and Ciudadanos could nevertheless play an important role in any coalition talks in December’s general elections.

In an otherwise quiet day for economic data, UK industrial orders and US existing home sales were the only items that could attract some attention.  A speech by Fed Vice –Chair Stanley Fischer could also be important.  Markets were also bracing for tomorrow’s busy data day, with business sentiment surveys out of the Eurozone and the US, as well as UK and US inflation readings.



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