Dollar remains dominant in face of fluctuating week

Chris Lee

A peculiar week in the foreign exchange markets began to draw to a close on Friday with the US dollar continuing to hold firm.

The currency, which has gone through a week of trade battles and question marks over its economy’s future performance, still clung on to its gains in a sign of just how respected it is as the world’s reserve currency.

It managed to reveal what was likely to turn into a week-length gain compared to its major competitors, including the Japanese yen, which saw a rise then fall over the week despite its label as a so-called “safe haven”.

It also held on in the face of China’s latest move in the trade woes between the two nations. Yesterday (Thursday), it announced that it would be instituting tariffs of its own in retaliation to the latest decisions by the US government.

The US dollar index, which tracks the greenback’s behaviour compared to six other currencies from across the globe, was slightly higher at 98.131. It has risen by just over a percentage point since its last low point, which it saw on August 9th of this year.

In its pair with the Japanese yen, the US dollar rested at 106.11 as trading kicked off in Asia. This came after a rise of a fifth of a percentage point on Thursday, spelling the end for what was a short-lived rise in yen value. Overall, the US dollar has seen a rise of almost half a percentage point in its pair with the safe haven over the course of the week.

The foreign exchange trading week has seen an odd mixture of geopolitical, trading and economic concerns all converge in one.

There are continued fears over the state of political unrest in Hong Kong, where earlier in the week there were significant clashes at the city’s main airport. It is believed that ongoing political tensions there, which pertain in part to the role of China in governing the city under a “one state, two systems” policy, could be causing severe economic damage.

The ongoing trade battle between the US and China does not have any clear end either.

The announcement earlier in the week that the yield curve of the US Treasury bonds had inverted for the first time since the years around the financial crash was also significant. Analysts pointed out that this has been a pivotal and integral part of the price chart in the run-up to previous recessions. This heralded bad news for the US’ future economic performance, although ironically it appears to have led traders to continue to invest their cash in dollars.

Despite all of this, other safe havens did not manage to defeat the dollar.

In the dollar and Swiss franc pair, for example, the greenback was again higher and saw the same level of gains on the week as it did against the Japanese yen of 0.4%.

The pound also saw some gains over the course of the week.

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Chris Lee
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