The US dollar was falling yesterday, but bounced today on speculations that the Federal Reserve will continue cutting monetary stimulus. The greenback rallied against the Japanese yen for the second session on prospects that the Bank of Japan will keep its monetary policy accommodative.
The US currency rallied last week after the Fed decided to start tapering of quantitative easing. The dollar retreated at the start of this week as traders were quitting the bets on additional gains by the year-end. Yet it looks like upward momentum was too strong and the currency resumed its rally.
The US economy looks robust enough to survive with smaller stimulus (though it is not strong enough to growth without stimulus at all). Japanese economic recovery, on the other hand, is still very fragile and will perhaps need additional easing measures. As a result, the dollar will likely continue to gain on the yen.
EUR/USD was down from 1.3694 to 1.3680 and GBP/USD declined from 1.6353 to 1.6345 as of 5:53 GMT today. USD/JPY advanced from 104.09 to 104.18.
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