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All Eyes On the Fed

Dollar vs. Yen at Two Week High

The US dollar rose on Monday hitting a near two week high against the Japanese yen. The dollar rose slightly more than 1.0% against the yen and trade was muted in Asia as many major cities closed for holidays. In midday trading in New York the dollar vs. yen rate rose 1.1% to 92.26.  A dearth of economic data caused traders to take profits on other currencies that have recently rallied against the dollar. Many force traders are awaiting the results of the Federal Open Market Committee meeting Wednesday. The FOMC is expected to keep rates at between 0% and 0.25% and many forex traders will be watching for any signs of the Feds exit strategy from quantitative easing. Vassili Serebriakov of Wells Fargo stated, “The markets are consolidating and correcting ahead of the Fed decision this week.”

Dollar Correction Due

Some forex traders and currency analysts noted that investors are concerned about short dollar positions and said a correction may happen in the near future. Vassili Serebriakov commented, “We have also seen from the speculative positioning an increase in dollar shorts, in particular euro longs. So it’s surprising to see that outstanding short exposure is being scaled back.” Forex traders increased short dollar positions, betting that the greenback will depreciate, last week to the highest since March 2008 according to the Commodity Futures Trading Commission.

Dollar Gains on Euro

The euro vs. dollar fell 0.3% to $1.4659 down from a high of $1.4766 last week, the highest since September 2008. Against a basket of currencies the DXY, ICE dollar future index rose to its highest since September 10th at 76.50 up 0.6 % for the day. Stocks were down dampening risk sentiment benefiting the greenback. Investors are watching the Fed closely watching for changes in the Fed’s economic assessment.

Bernanke Says Recession “Very Likely” Over

In a statement last week Fed Chairman Ben Bernanke said that the recession was “very likely” over. Marc Chandler of Brown Brothers Harriman believes that the Fed is likely to be cautious about the US economy and will keep interest rates at record lows for an extended period of time.

Quick Forex Tip: Interbank forex dealers have access to better spreads than the average investor because of the size of the transactions. Small investors who want to trade interbank fx now have access through the use of forex brokers who are able to put together large transactions. Additionally, many very wealthy individuals trade interbank fx hoping to profit from currency fluctuations. Whether you have a lot or a little money to invest, interbank forex trading is a great option because forex markets are almost recession proof.


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