USD is Boosted

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USD is Boosted

USD is Boosted

Aug 27 2015, 12.52pm GMT


You can't keep a good man down seems to be very much an apt description of the U.S. dollar as it rebounded from losses earlier in the week to strengthen for the second consecutive session on Wednesday.

The Chinese central bank, the People's Bank of China, had pumped an additional 140 billion yuan into China’s financial system earlier in the day, in addition to the decision the previous day to increase interest rates and loosen the controls on bank lending. The action of the central bank proved to be a booster for both the dollar and U.S. stocks which had been under the whip recently.

The dollar benefited from further positive economic data with a report on durable goods orders showing an increase for the second month in row. This data followed the favorable consumer conference readings that were released on Tuesday as investors found new reasons to have continued confidence in the U.S. economy.

The dollar, which to a degree was replaced as a safe haven currency by the Japanese yen when investors opted out of the dollar after the start of the Chinese market turmoil which rapidly spread to global markets, suffered from the uncertainty over China. The dollar has traded lower as a result of the additional uncertainty and increasing doubt about the possibility of a Fed move on rates in September.

Matt Weller, senior technical analyst at Forex.com commented, “the dollar is trading more like a risk currency than a safe haven.”

Meanwhile, the euro (EURUSD, -0.176%), which had strengthened against the dollar earlier in the week, lost ground as it fell 0.1% against the dollar with one euro costing $1.1398.

Similarly, the dollar (USDJPY, 0.28) regained lost ground against the Japanese yen as it gained close to 0.4% to trade at 119.10 yen.

Also, emerging market currencies recovered slightly against the dollar for a second session, as the Brazilian real (USDBRL, -0.2058%) recorded a new record low against the dollar while the Indonesian rupiah (USDIDR, -0.15%) dropped to the lowest level it has had against the dollar since 1990.

For now the dollar is back in favor with investors with the only cloud on the horizon - the lack of any clear direction with regard to the Federal Reserve and its monetary policy.

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