Forex Review – Dollar rallies against yen

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EURUSD took a pause to trade in a range during the U.S. session, after hitting a new March high of 1.3384 in European trading. The pair was supported above 1.3316. The dollar briefly gained after U.S. economic data on consumer confidence. The numbers were in line with expectations and were perceived to show an improving outlook for the U.S. economy.

However, dollar direction is still driven by Fed monetary policy. On Monday, the dollar weakened sharply after comments by Fed Chairman Ben Bernanke signalled that further stimulus would help improve the weak U.S. labour market.

GBPUSD hit a four-month high of 1.5999. Further gains are expected to remain capped at this key 1.60 resistance level. The move in sterling is driven more by dollar weakness,rather than domestic U.K. fundamentals as the U.K. economic outlook remains shaky.

USDJPY rose sharply on speculation that the Bank of Japan is considering another monetary easing soon which could further erode yen value. The Japanese currency began to weaken from early February when the BOJ surprised markets by expanding its bond-buying. USDJPY opened New York trading at 82.82 and rose to 83.37.

EURJPY advanced to a session high of 110.60 climbing from the open of 111.24.

The U.S. dollar gained against the Canadian dollar and aussie as commodity prices eased. USDCAD rose to 0.9950 from 0.9899. AUDUSD slid to 1.0460 from 1.0556.

The stronger dollar pushed gold prices down to $1,679.07. The two assets usually have an inverse price relationship. Earlier in the day, gold hit a two-week high of $1,696.73.