Dollar Responds Well to Fed Plans

The US Dollar showed strong gains in Tuesday’s trading on expectations the Fed would raise interest rates in the first quarter of 2022 to counter high inflation.

The Dollar index, which measures the greenback against six peer currencies, was 0.217% higher at 96.261. This came after the bullish news that US home prices were up over 17% from this time last year. Meanwhile, the Japanese Yen, which had been enjoying some attention as a safe-haven currency, weakened to 114.935 against the Dollar, a level not seen since late November.

There was more good news from the stock markets as the S&P 500 reached a new record high for this holiday season, boosted by encouraging sales data that showed consumers were looking past the Omicron variant. The Australian Dollar rose to $0.7263, its highest level since late November. The Sterling also reached a one-month high of $1.3461. Market analysts say these gains are fueled by improved risk sentiment and investor optimism for how things are shaping up for next year.

What does this mean for me?

For the serious FOREX trader, keeping tabs of daily currency movements and the events that underpin them is an important habit to develop.

If you have been watching recent announcements by central banks and keeping close to consumer sentiment, the improved outlook enjoyed by the Dollar will come as no surprise.

As you learn how to make sense of how global events shape currency movements, you can trade with more confidence.