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Contributors Forex: US Dollar Looks to Home Sales Data for Fed Policy Clues

Talking Points:

  • New Zealand Dollar Gains on Firming RBNZ Interest Rate Hike Outlook
  • Japanese Yen Sold on Ebbing Safe Haven Demand as Nikkei 225 Rallies
  • US Dollar Stronger on Fed QE “Taper” Bets, Home Sales Data on Tap

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The New Zealand Dollar outperformed in overnight trade, rising against all of its top counterparts as RBNZ monetary policy expectations firmed. Traders are now pricing in a full percentage point (100bps) in interest rate hikes over the coming 12 months, according to data from Credit Suisse. That makes for the most supportive policy outlook among the G10 currencies. The Japanese Yen declined as the Nikkei 225 pushed higher, sapping haven demand for the safety-linked currency. Japan’s benchmark stock index closed up 1.54 percent on the day.

The US Dollar advanced against most of the majors in a move the newswires chalked up to speculation surrounding this week’s economic news-flow and its implications for Fed QE “taper” bets. On balance, US economic data has outperformed relative to expectations since the beginning of the month (according to data from Citigroup). That hints Ben Bernanke and company may move to cut back stimulus sooner than the March 2014 consensus time frame that emerged in the aftermath of October’s US government shutdown. The week begins with October’s Pending Home Sales figure. Expectations see a 1.1 percent increase snapping four consecutive months of losses.

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