Forex Review – Dollar rises higher against yen and sterling; gold hits 3-mth high

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The US dollar was the biggest gainer today, against the yen and the British pound.

The ICE dollar index, which measures the dollar’s performance against a basket of six major currencies, rose to 79.21, up 0.2 percent from late Tuesday.

The dollar rose to its highest point against the yen since August. The Japanese currency has been declining every day against the greenback since February 14, when the Bank of Japan announced quantitative easing to stimulate Japan’s economy by adding 10 trillion yen to its asset-buying program. This increase in money supply is putting downward pressure on the yen. USDJPY hit a high of 80.39 in New York today versus 79.84 high on Tuesday.

Sterling tumbled against the dollar after dovish Bank of England minutes showed that two of its nine policy makers had voted earlier this month for more aggressive stimulus of GBP75 billion of additional bond purchases rather than the GBP50 billion, which was eventually agreed upon. This raises speculation that the BOE might expand QE further again.  GBPUSD tumbled over 1 percent on the day to reach a low of 1.5647. The pound also fell against the euro, pushing the single currency to its highest level in more than two months. EURGBP hit a high of 0.8458.

Euro was flat against the dollar as gains made after the Greek bailout deal remain capped due to concerns surrounding the implementation of the austerity plan and private sector bond swap. EURUSD is likely to remain trapped within a 1.3180-1.3280 range for now as markets take on a cautious tone.

Crude oil prices were buoyed by lingering fears of a supply disruption from Iran due to a European embargo. Crude hit a high of $106.69 in New York trading.

Gold surged to a three-month high of $1,781.38, gaining over $30 in the New York trading session on technical factors, after breaking key resistance levels. Also, gold is taking direction from other metals, primarily platinum prices, which hit their highest in five months on supply worries driven by a labor dispute in South Africa, the world’s top platinum producer.