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US Dollar Ends Week of Fed Lift-Off with Gains, Future Unclear

December 19, 2015 at 14:38 by Vladimir Vyun

Mix of US dollar billsThe Forex market was in turmoil after the Federal Reserve’s decision to hike interest rates even though such an event had been expected by market participants. While the US dollar ended the week with gains against the vast majority of most-traded currencies, the future of the greenback is not that clear.

The Federal Reserve decided to increase borrowing costs for the first time since 2006. The decision looked very bullish for the dollar, yet the currency was not in a hurry to start rising, though it rallied after all. There were couple of reasons for such behavior: the fact that the rate lift-off was largely priced in and the comments from the Fed about gradual pace of monetary tightening down the line. Those considerations make it unclear whether the dollar is going to keep this week’s gains in the future.

The US currency gained against most of its rivals, but there were exceptions. The yen rallied strongly after the policy announcement from the Bank of Japan, ending the week almost flat versus the US dollar. Surprisingly enough, the New Zealand dollar was strong enough to end the week with a small gain against the greenback.

EUR/USD dropped 1 percent from 1.0984 to 1.0873 over the week. GBP/USD was down as much as 2 percent from 1.5228 to 1.4917 — the lowest weekly close since April. At the same time, USD/JPY ended the week at 121.25, very close to the opening rate of 121.14. NZD/USD gained from 0.6714 to 0.6736 while its weekly maximum was at 0.6833.

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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