Dollar Remains Strong Against Euro and Gold, BOJ Meeting Awaited

The U.S. dollar’s bull ran out of steam on Friday when the currency retreated from a 14-year high on Friday following a rally coming after Fed’s first rate hike in a year. The U.S. dollar index edged lower against a trade-weighted basket of six major currencies, but remained near Thursday’s peak of 103.55, a level not seen since December 2002.

For the week, the index soared around 1.3% as the U.S. Federal Reserve increased its benchmark rates by 0.25 percentage point on Wednesday and signaled a prospect of a more-aggressive rate-hike path in 2017. The central bank’s President Chair Woman Janet Yellen stated that the Fed may raise rates more quickly than previously anticipated with three rate increases in 2017, which is up from the two hikes predicted in September.

In the week ahead, there will be not much in the way of U.S. data but the release of Thursday’s final reading on U.S. third quarter gross domestic product. Market players will be eyeing fresh indications on the strength of the economy and further hints on the future path of monetary policy.

Closing the week, the Japanese Yen fell to 117.97 per dollar, trimming its losses to 2.2% on the week after dropping to Thursday’s 11-month trough of 118.65. The Bank of Japan is expected to hold its negative interest rates and 10-year government bond yield target steady at its monetary policy meeting on Tuesday.

Also on Tuesday, the Reserve Bank of Australia is scheduled to publish the minutes of its latest monetary policy meeting. Investors will be looking for insight into how the RBA’s officials view the economy and their policy options.

Last week was also a big loss for the euro when the single currency plummeted more than 1% and fell as low as 1.0365, the weakest level since January 2003. The pair EURUSD rebounded on Friday, finishing the week at 1.0450.

Gold prices recorded its sixth straight weekly decline on Friday, weighed by expectations for higher U.S. interest rates in the months ahead. Gold for February delivery on the Comex division of the New York Mercantile Exchange ended its last session of the week at $1,137.40 a troy ounce, pulling back from $1,124.30 logged on Thursday, a level not seen since February 2.

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