The US Dollar Grows Muscle

New York (Jan 16)   The US dollar eased a bit this morning after trading on a positive note on Wednesday. Stronger than expected US data and positive comments from the Federal Reserve in the current edition of the Beige Book last evening shows that the US economy is making a “moderate recovery”.  Words such as spotty or weak or mixed have been removed from the forecast as the US economy is full steam ahead. Last week traders were stressed on the disappointing jobs report, but quickly turned positive after retail sales climbed and the Empire State manufacturing index soared above expectations. The US dollar is trading at 81.06 this morning. The latest was the New York region manufacturing figures released on Wednesday, which rose more than expected. The Federal Reserve Bank of New York’s general economic index increased to 12.51 against a Bloomberg consensus forecast of 3.5 from a survey of economists. The dollar appreciated following these news. The dollar is only bound to get firmer over the next few months as more positive economic data emerge. Improving economic indicators would not come as much of a surprise given that most global institutions, including the International Monetary Fund, expect stronger economic growth in the US this year.

Traders continue to believe that the main performer in the coming months will be the U.S. dollar as economic outperformance becomes more pronounced,” currency strategists including Jens Nordvig, wrote in a note yesterday. “We are penciling in further significant yen weakness.” The yen has fallen 13.7 percent in the past year, the biggest loss after the Aussie’s 14.8 percent drop, according to Bloomberg Correlation Weighted Indexes, which track 10 developed-nation currencies. The euro strengthened 7.3 percent, while the dollar advanced 4.4 percent.