Dollar Surges As Euro, Yen Plunge

(RTTNews) - The U.S. Dollar rallied emphatically against major currencies during the week ended October 10 amidst political instability in France and Japan that undermined the euro and the yen. However, President Trump's announcement of fresh tariffs against China on Friday reignited concerns over how the trade war could impact the U.S. economy, dragging down the greenback.

The U.S. dollar inter alia gained against the euro, the British pound, the Australian dollar, the Japanese yen, the Swedish krona, the Canadian dollar and the Swiss franc. The 6-currency Dollar Index added more than a percent in a week's time.

The Dollar Index (DXY), a measure of the Dollar's strength against a basket of 6 currencies added 1.29 percent during the week ended October 10. The DXY which had closed at 97.72 on October 3 finished trading at 98.98 a week later. During the week, the index traded between the low of 97.96 recorded on Monday and the high of 99.56 recorded on Thursday.

FOMC minutes released on Wednesday revealed a divergence among the members over the path of rates. Even though balancing of the risks of a slowing labor market and combating the sticky inflation remained prime on the Committee's agenda, market expectations of another rate cut by the Fed in late October remained intact.

Amidst the political drama in France that dented the euro, the EUR/USD pair slipped 1.05 percent. During the week ended October 10, the EUR/USD pair dropped to 1.1620, from 1.1743 a week earlier. The pair ranged between $1.1743 recorded on Monday and $1.1542 touched on Thursday.

The week ended October 10 witnessed the pound falling 0.89 percent against the dollar amidst the Bank of England's warnings about increased risk of a sharp market correction. The Bank of England's Financial Policy Committee identified risks associated with geopolitical tensions, global fragmentation of trade and financial markets, and pressures on sovereign debt markets which if materialized could impact the U.K. The sterling, which had closed at $1.3480 on October 3 declined to $1.3360 by October 10. The GBP/USD pair traded between a high of 1.3492 touched on Monday and a low of 1.3260 recorded on Friday.

The Aussie also plummeted against the U.S. Dollar during the week ended October 10. The slippage for the AUD/USD pair during the week was almost 2 percent, from 0.6604 on October 3 to 0.6472 on October 10. The pair traded between a high of 0.6626 touched on Tuesday and a low of 0.6472 recorded on Friday. Data released during the week showed Australian consumer sentiment dropping to a six-month low in October amidst renewed concerns over inflation and the economic outlook.

The Japanese yen plummeted 2.53 percent during the week ended October 10 as expectations of a dovish monetary policy were renewed following fiscal dove Sanae Takaichi's surprise victory to lead the ruling party. The USD/JPY pair which had closed at 147.45 on October 3, jumped to 151.18 in a week's time. The pair ranged between 149.05 and 153.29 during the week.

The dollar which sank on Friday following President Trump's fresh salvo on tariffs for China rebounded on Monday amidst Trump softening his tariff warnings. The Dollar Index has increased to 99.15, versus Friday's closing level of 98.98.

Amidst the Dollar's rebound, the euro and the pound have retreated. The EUR/USD pair has slipped to 1.1583 from 1.1620 at close on Friday. The GBP/USD pair has decreased to 1.3335 from 1.3360 at the end of the previous week.

The AUD/USD pair which was at 0.6472 at close on Friday has however rallied to 0.6521. The Reserve Bank of Australia's hawkish tone amidst concerns about inflation as well as President Trump's toning down of the tariff warnings on China boosted the currency. The yen has weakened further amidst a rift in the governing coalition party in Japan. The USD/JPY pair has increased to 152.17 from 151.18 at close on Friday.