Forex Market update: Dollar Index Rise Sharply


The U.S. dollar index rose on Tuesday amid rising speculation that the Federal Reserve will soon start to wind down its quantitative easing amid improving macroeconomic environment. A better-than-expected retail sales data release on Tuesday underpinned the fact the U.S. economy was recovering steadily.

The dollar index, which is a measure on U.S. unit’s performance vis-à-vis a basket of six major traded currencies, rose 0.26% to 81.70.

The WSJ $ Index, whose indexing criteria is broader, was up 0.52% to 73.99.

Earlier today, the Commerce Department said that the consumer spending increased at its fastest pace since December in July. The retail sales index, which does not include cars, gasoline and building materials, rose 0.5% in July, surpassing economists’ forecast for 0.3% gain. The U.S. consumer spending is considered as one of the pillars of the U.S. economy. The consumer spending accounts for 70% of the nation’s total output.

Investors will now keep a close eye on the Atlanta Fed President Dennis Lockhart speech, which is scheduled later in the afternoon. Lockhart said last week that the Federal Reserve could start the tapering of the bond purchase program in any of this year’s remaining three open market committee meeting (FOMCs). Besides, Lockhart, as many as three other top officials including the Chicago Fed President, Charles Evans hinted at early winding down of the asset purchases, last week.

The winding down of asset purchases will set interest rates go up which in turn boost the demand for dollars due to favorable interest rates differentials.








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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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