The dollar held its ground today maintaining a slight advance against its peers in thin volume traded as the dollar was supported by predictions that US economic recovery will overtake other leading economies. The dollar traded close to the 4.5 year high set on Friday. Over the last 2 months the dollar has been widely stronger on generally solid economic data which has led the market to predict a rate increase by the Fed at some point in 2015, while the European Central Bank and the Bank of Japan will be more flexible in their policy view in order to trigger growth and inflation.


The euro strengthened against the dollar as investors saw its pricing to be more favorable in comparison to the dollar with the pair coming off 26 month lows set last Friday. The euro was virtually unchanged against the pound and stronger against the yen. Tomorrow the euro zone is set to release figures on industrial production.


The pound held its ground against the dollar due to thin volume while the dollar took back losses due to Friday’s US jobs report. The pound had fallen to 14 month lows towards the end of last week following surveys of UK’s service and manufacturing sectors which indicated that economic recovery is lagging.


The yen weakened against the dollar with the pair trading close to 7 year highs breaking its 116 handle. The yen came under pressure following talk of the possibility that Japan’s government will delay a proposed sales tax increase which led to solid gains in Asian equity markets overnight, as the market was more willing to take on risk diminishing the yen’s safe haven demand. Economic data showed that Japan’s current account surplus of Y963 billion in September was well beyond forecasts also increasing desire to take on risk. The yen was further weakened by news that Prime Minister Abe may call an election next month in order to quickly implement his reforms.


The Australian and New Zealand dollars strengthened while the Canadian dollar weakened against the US dollar.


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