Currency Note US Dollar

US dollar continues to strengthen

By Ricky Bean November 7th, 2014

The US dollar has had a roller coaster week, seeing shifts in both directions over the days. The currency started strongly, mainly thanks to the Purchasing Managers’ Index (PMI) data from the manufacturing sector. A better-than-expected expansion helped the dollar rise to its strongest in almost seven years against the Japanese yen, while also reaching fresh two-year levels against the euro, as the optimism over the US economy helped against its perceived weaker counterparts.

This trend was reversed on Tuesday, as the trade balance showed a larger than expected deficit. Mid-week saw a return of strength for the US economy, with both the election results and positive labour data from the independent non-farm employment change adding to the currency’s performance.

Another positive day came courtesy of yesterday, with the dollar gaining ground on the vast majority of its major partners. The labour market was again the biggest influence, this time in terms of the unemployment claims figure. This came out better than expected, ahead of today’s final – and main – release, the ever important official non-farm employment change figure, which is due this afternoon alongside the unemployment rate.

Following on from this, investors will be keen to hear from Federal Reserve Chair Janet Yellen, in terms of her thoughts on the recent hopes of interest rate rises. Investors will also be scrutinising her words for any clues as to the central bank’s plans in terms of a potential interest rate hike.