The U.S. dollar remains among the strongest of currencies out there. Not only is it finding support from safe-haven flows amid the current stock market weakness, but it is also in demand due to the growing disparity between monetary policies in the U.S. against other major economies.
As mentioned in my earlier post, trading is likely to wind down ahead of Christmas, but there are a number of currencies which may experience increased levels of volatility from time to time this week.
After big overnight falls, the U.S. dollar managed to bounce back a little shortly after the New York open, the Dow was well over 100 points off its earlier lows and the VIX had declined more than 10% from its earlier highs. It wasn’t exactly risk-on, but the situation certainly looked a lot calmer than at the European open.
The euro jumped above $1.07 for the first time since mid-November on Monday, rebounding around 2 cents after hitting 21-month lows after Italy's prime minister conceded defeat in a referendum on constitutional reform and said he would resign.
European stocks and the euro rose on Monday, battling back as investors bet that Prime Minister Matteo Renzi's resignation after voters rejected his constitutional reforms would not trigger a snap election in Italy.