The ongoing debate amongst investors about whether or not the U.S. stimulus impact would let up on the dollar for any appreciable amount of time, seems to have been settled today as the currency shot up to nine-month highs.
As you know, the Fed recently came out of a long-anticipated session in which they were rumored to be discussing the future of U.S. inflation. Well, the central bank has indeed been discussing just those topics, and they emerged with a plan that has caused the dollar to skyrocket.
“We can now see an end point to zero rates, and they’ve told us in very plain-speaking English that they’ve commenced the conversation on how to commence tapering,” Richard Franulovich was reported by MetaNews as saying.
He continued to comment on the state of the position unwind, saying,
“That signal has precipitated a dramatic position unwind, because U.S. dollar shorts were based on that unending liquidity tap from the Fed, and zero rates.”
Other currencies seemed to balance out in Asia and Japan, but did not show any affinity for real recovery, yet. The euro, for example, stopped just short of a two-month low at $1.1904.
The Loonie stopped at $0.7555, which was, incidentally, also near the two-month dip of $0.7540.
The New Zealand currency and others showed similar levels, while the former was influenced once again by employment data that was reported in the afterhours.
The USD seems to be gunning for a 0.5% rise against the yen, which itself traded at 110.25 per dollar.
“The viciousness with which the dollar has bounced back, the impulsive nature of it, tells me that there’s been a decisive shift for a lot of big, stale positions,” said Franulovich.
“This is a meaningful, decisive re-thinking in dollar prospects, just by the nature of the price action in the last couple of days.” The ongoing debate amongst investors, continues.