The dollar gained ground against the yen on Tuesday after a roller-coaster 24 hours which traders say may just be a precursor to three weeks of risk-packed events for the $5 trillion a day currency market.
The euro has weakened against most currencies in recent times but has strengthened against the perceived safe-haven Japanese yen, due to the generally positive risk sentiment in the markets. But with the U.S. stock markets ending its remarkable winning streak and the Italian referendum and OPEC meeting being among the key short-term risk events, the Euro/Japanese yen currency pair could be the next domino to fall if investors’ attitude towards risky assets turns negative now.
The greenback surged to new highs against a basket of foreign currencies, causing the U.S. dollar/Japanese yen (USD/JPY) currency pair to push above 112, EUR/USD tumbled below 1.0550 and dollar-denominated gold took an absolute hammering as it skidded below $1,200 to drop to a low so far of about $1,881.
The dollar powered to its highest levels since 2003 against a basket of currencies on Friday, with Donald Trump’s victory in the U.S. presidential election helping to give the greenback its best fortnight against the yen in almost 30 years.
Dollar bullish investors stole the show during trading on Monday with the Dollar Index surging to 11-month highs at 100.00 as expectations intensified during the Federal Reserve raising U.S. interest rates in December.
The dollar was set for its best week in a year on Friday, extending gains against the yuan and Mexican peso on concerns emerging markets could suffer most if President-elect Donald Trump turns his protectionist rhetoric into actions.