USD Rallies After End of QE

Central banks around the world are giving investors the green light to buy the dollar, pushing it to a three-week high against its major counterparts after the Federal Reserve ended its bond-purchase stimulus program.

The greenback rose for a second day versus the euro as reports showed the U.S. economy expanded more than forecast in the third quarter. The shared currency, set for its biggest annual drop since 2005, slid before a report tomorrow that analysts said will show inflation remained below the European Central Bank’s target. Brazil’s real rallied after an unexpected rate increase, while Norway’s krone reached the lowest since 2009.

“The combination of the market’s reaction to the Fed policy announcement and now the data is supportive of a shift of focus from the end of quantitative easing to the next policy move,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co., said in a phone interview. “The dollar has had a good 24 hours.”

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, reached 1,073.85, the strongest since Oct. 6, before trading little changed at 1,068.91 at 10:35 a.m. New York time. It gained 0.6 percent yesterday.

The dollar added 0.1 percent to $1.2616 per euro after appreciating to $1.2548, also the strongest level since Oct. 6. The greenback traded at 108.89 yen after touching 109.36, the highest since Oct. 6. Japan’s currency rose 0.1 percent to 137.39 per euro.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza