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QE Tapering Leads to Good Week for US Dollar

February 1, 2014 at 9:47 by Vladimir Vyun

The all-seeing eye on top of pyramid on one-dollar billThe most important event for the US dollar this week was the monetary policy meeting of the Federal Reserve. At first, it looked like the event is not going to help the greenback much, but in the end the currency shot out to the upside with the help of quantitative easing tapering.

The dollar was not particularly strong at the start of the week. Interest rate hikes from the central banks of India and Turkey resulted in risk appetite on the Forex market that weakened the US currency. Then QE tapering happened.

Initially, it looked like the greenback is not going to profit from the announcement too much. Yet traders digested the news and the currency broke out to the upside later. The dollar jumped against most other major currencies, but struggled against the yen, which also profited from risk aversion that followed the tapering announcement.

EUR/USD dropped from 1.3668 to 1.3485 (1.4 percent) over the week. GBP/USD went up from 1.6494 to 1.6624, but retreated to 1.6437 by the end of the week. USD/JPY opened at 102.13, reached the weekly high of 103.43, but pulled back and closed at 102.15.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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