Tuesday December 13, 2005 - 06:00:08 GMT
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Tricom Futures and Foreign Exchange -
Forex: Ho Ho Ho, The USD's run is over ..... (for now)
The US dollar was trading mixed against the major currency pairs, but further profit-taking is likely on expectations that the Federal Reserve may be close to a peak in interest rates.
The US dollar was heavily sold overnight as traders anticipate a less hawkish statement from tonight's Federal Open Market Committee meeting, where a 13th consecutive 25 percentage basis point hike is fully priced.
The euro rose to a high of 1.1983 usd overnight on expectations that the FOMC statement will signal that monetary policy is less accommodative, and the US dollar/yen fell to a low of 119.51 yen. The US dollar was further undermined by comments from Chinese central bank advisor Yu Yongding, suggesting China should slow its purchases of US dollar reserves. In addition, the US dollar is also under pressure from rumours that purchases are drying up related to the Homeland Investment Act - the repatriation of investments to take advantage of tax breaks that end this year.
Talk of no further rate hikes in the US, light volumes in the market, and end of year squaring up can all be attributed to the overnight USD softness.
I think we might see this continue into the Xmas/New Year period, before the market returns to work in Mid-January and re-asseses the outlook for the USD.
I'm happy to stay on the sidelines for the remainder of the year, I always see this time of year as a little whippy, and too much of a gamble. If you can guess which way the big players will take it on a given day you can win well, but there's an even money chance that you could also be stopped out a great deal of the time.
This will be my last report for the year, and so i'd like to take this opportunity to wish you all a very Merry Xmas, and a great 2006. Thanks for all those who've given me some great feedback throughout this year.
Today's Economic Release:
US: Retail Sales
US: FOMC Meeting - expecting 25bps
Today's Top Trades
For more ideas send me an email, [email protected]
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