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Contributors Forex: US Dollar May Extend Gains on Pro-Taper Fed, G20 Commentary

Talking Points:

  • Japanese Yen Sold as Asian Stocks Follow Wall Street Higher
  • G20 Draft Communiqué Shows Support for Stimulus Withdrawal
  • US Dollar May Rise as Fed’s Fisher Talks Up “Tapering” QE

The Japanese Yen underperformed in overnight trade, falling as much as 0.3 percent on average against its leading counterparts, as a recovery across Asian stock exchanges sapped demand for the safe-haven currency. The MSCI Asia Pacific regional benchmark equity index rose 1 percent, seemingly taking its cues from a rebound on Wall Street.

Looking ahead, a quiet economic calendar in European and US trading hours puts the spotlight on the “Fed-speak” calendar, with comments from FOMC policymaker Richard Fisher in focus. The usually hawkish Dallas Fed President is likely to add his voice to the already single-minded chorus of central bank officials arguing in favor of continued “tapering” of QE asset purchases.

Rhetoric supportive of stimulus reduction will follow the firm tone noted in minutes from January’s FOMC policy meeting published earlier this week and a six-month high on headline CPI inflation revealed yesterday. A draft communiqué from the weekend’s sit-down of G20 finance ministers and central bank leaders likewise supported backed the withdrawal of monetary stimulus.

As we discussed in detail earlier in the week, news-flow supportive of QEcutback continuity stands to aid the nascent recovery in the US Dollar. The benchmark currency has now secured four consecutive sessions in positive territory and is now working on the fifth, which would amount to the longest back-to-back rally since late October 2013.

Asia Session
240214a

European Session
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Critical Levels
240214c

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