Forex Markets – USD Outlook

With mainstream analysts along with the herds in the markets believing that the long-term effect of the crisis is “a growth shock to the economy, and that it’ll have a dollar-negative effect”, focus is partly shifting towards those markets expected to benefit from such a development. Higher-yielding currencies including South Africa’s Rand and the Mexican Peso rallied against the dollar as a tentative agreement by the US Senate and House to extend the nation’s borrowing ability prompted an increase in investors’ risk appetite in particular outside the — itself increasingly risky — U. S. The Yen still fell versus all of its 16 most-traded peers seen as a sign by many that the demand for safe haven currencies started to drop in the light of Senate Majority Leader Harry Reid and Minority Leader Mitch O’Connell announcing an accord to end the government shutdown and kick the can of fiscal deadlines down the road again and into next year. The New Zealand’s dollar reached a four-week high as inflation fuelled bets that interest rates will rise. The dollar was little changed versus the euro at $1.3528 after weakening earlier as much as 0.3 per cent and appreciating 0.4 per cent. It touched $1.3473, the strongest since Sept. 30. “We’ve just had a hairy run thanks to Washington, and that hasn’t caused euro-dollar to break,” commented Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York. “I don’t think the catalyst to buy dollar on this current resolution is sufficient to drive the dollar higher at this point.”