Dukascopy Market and Economic Research

Highlights of the latest Marker Research release on EUR.

Full research available here.



As it is apparent from the trajectory of the equally-weighted index of the common currency throughout the previous week, there was nothing that could have returned the Euro its former attractiveness. Consequently, the instrument continued to grind lower, this time losing 0.9% of its worth within five days. The news directly responsible for such a poor performance was lacklustre growth of Eurozone retail sales volume. Gloomy reports on the economic well-being of Germany also contributed to the continuous sell-off by accelerating it.





There were in fact a few attempts to halt the decline, namely during the ECB press conference (when the bank revised its forecasts upwards) and amid the disappointing U.S. employment change figure (which allowed the Euro to gain at the expense of the greenback). However, they were instantly negated by the dominantly negative sentiment and thus failed to change the generally bearish course of the single currency.
Meanwhile, in the longer time perspective, the index is only 0.2% lower than it was 20 trading days ago. If we look at an even greater time span—six months, than the Euro becomes one of the most bullish currencies (+3.26%), only behind the British Pound (+7.00%) and the Swiss Franc (+3.34%).

Highlights of the latest Marker Research release on USD.

Full research available here.



Until Sep 4 the U.S. Dollar had been making strong gains due to the GDP growth rate overshooting expectations. As it subsequently turned out, the bullish run did not last for long, being negated in the end by a number of factors, which weighed upon the currency and forced it to give up on average 1.3% of the worth in terms of its major counterparts. The main gainers amid the U.S. Dollar’s debasement were the high-beta commodity currencies, namely New Zealand, Australian and Canadian dollars, which appreciated respectively 3.2%, 2.8% and 1.9% relative to the buck.



The only currency that was even more bearish than the greenback was the Yen, value of which was damaged more by the emerging risk-on sentiment (-2.1%), even though the forecasts on Japanese economy’s performance in the future have been revised upwards lately.
Weak demand for the safe haven assets was caused by stabilisation of the world’s geopolitical situation, but it was rather a background for than the primary driver of investors’ desire to reduce their exposure to the Dollar. It was the slightly disappointing employment change figure that completely nullified the positive effect of the improvement in the U.S. services sector, lower-than-expected unemployment claims and falling unemployment rate, thus confirming it was the most important event within the last five days.

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A brief summary of the research:

Rescaled range analysis, or RRA, is one of the many techniques used to examine and forecast the movements of economic indicators and financial assets. In contrast to various other methods, RRA can be applied to all kinds of data series regardless of their statistical properties. It can be viewed as a major advantage, as in most cases financial data does not meet the strict requirements of forecasting models.
In this research we examine the implications of RRA and the ways how to use the information it gives in practice.

In finance, RRA is used to study mean reversion and mean aversion in the process of price development. It is more commonly applied to stock market, but methodologically there are no restrictions against employing it for investigating exchange rates. Therefore we use RRA to try and classify the behaviour of two major currency pairs – EUR/USD and USD/JPY, - and two crosses – EUR/CHF and GBP/JPY. The datasets are formed from ten minute, one hour and one day candles up to August 2013.

Methodology
The main purpose of rescaled range analysis of a process is to estimate its Hurst exponent – a measure of the so called long-term memory. The notion of the Hurst exponent comes from an idea about dependence between certain characteristics of the process and a time span over which they are observed.

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Results
1. Modified RRA gives more accurate results for random processes.

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2. RRA classifies all examined exchange rates as strongly trending.

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3. RRA shows a direct relationship between time-separated returns.

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Conclusions
We studied two methods of estimating the Hurst exponent – the measure of long-term memory in a process. We saw that classical rescaled range analysis, which is one of the most commonly used means for estimating the parameter, and its modified version both have their own flaws. Classical RRA proved to overestimate the Hurst exponent, while the modified method, on the contrary, produced underestimated values. However, modified RRA gave a lesser error of estimation, and thus seemed to be more accurate.


All examined exchange rate had high values of the Hurst exponent, indicating a tendency to follow persistent trends. In most cases these high values were supported by relatively high ADX. We also saw that against the background of the high values of the Hurst exponent the existing trends most often preserve their direction and strength for some period in future. However, the analysis of the exchange rates did not give any values of the Hurst exponent equal to or lesser than 0.5, while there were plenty of cases of the small values of ADX. Therefore it is hard to make assumptions about a relationship between the results of RRA and more popular measures of describing trends.


RRA provided some new insight into the behaviour of currency pair returns. It appeared that there is a direct relationship between multiperiod logarithmic returns, and that it strengthens with increasing periods. Results show that the sets of ten- and more period returns have a Hurst exponent high enough to classify them as persistent. This denies the pure randomness of the development of currency pair returns and suggests that there might be fairly efficient methods for modelling the returns and thus forecasting future moves.

Highlights of the latest Marker Research release on GBP.

Full research available here.



This week the British Pound has been recovering from losses incurred last Friday, when the index fell 0.5%. Then the selling pressure was invoked by a notable deceleration in manufacturing production growth coupled with widening trade deficit. Neither softness of Eurozone data nor unsatisfactory results of the U.S. labour market that resulted in depreciation of the respective currencies managed to benefit the value of the Sterling in any noticeable way, though we may suspect its dip could have been significantly deeper, if the German industrial production had not contracted as much and non-farm payrolls number had come out as expected.




After the weekend there was a growing interest of investors in riskier assets, as a result of which the Pound was able to gain against the safer currencies, such as the U.S. Dollar (+1.3%) and the Japanese Yen (+1.1%). However, even despite a decrease in the unemployment rate, the Sterling’s rate of appreciation proved to be unable to outpace the New Zealand Dollar (-1.6%) and the Swedish Krona (-1.3%).
On the whole the U.K. currency retains the upward momentum, being underpinned by generally positive economic data. During the past 20 days the equally-weighted index went up by 1.2%. In the perspective of the last six months, the Sterling is the most bullish currency, it rose on average relative to its major counterparts by 6.4%.

Highlights of the latest Marker Research release on EUR.

Full research available here.




Along with its partner, the Swiss Franc, the common European currency continues to exhibit distinct unresponsiveness to the latest events, staying at the same level all the way from Sep 9 to Sep 13. There was virtually no change in the Euro’s equally-weighted index over the past five trading days. Even if we take into account a longer time period, specifically 20 days, the value of the Euro on average slipped by merely a quarter of a percent, while the British Pound and the Australian Dollar, for example, within the same time period managed to gain 1.6% and 1.5% respectively.





The biggest last week’s movers were the currencies with extreme risk profiles. From the one side—high-beta currencies, namely the New Zealand Dollar and Swedish Krona, from the other—safe havens, such as the U.S. Dollar and Japanese Yen. The first group was staging impressive gains at the expense of the latter, being that the sentiment across the markets was notably improving amid better forecasts on Japan’s GDP growth and amid accelerating expansion of the Chinese industrial production. However, this was mostly topical during the first part of the week, afterwards the currencies lost their momentum and were largely trading sideways on Thursday and Friday. The maximum deviations for NZD, SEK, USD and JPY amounted to 1.9%, 1%, -1.6% and –1.6% accordingly.

Highlights of the latest Marker Research release on USD.

Full research available here.



The U.S. Dollar follows the bearish trajectory initiated on Sep 6 that came to replace the 12-day bullish run (Aug 21—Sep 6), as the public became concerned with respect to the U.S. labour market, which had not created as many jobs as estimated, even though the unemployment rate had been consistently moving down and overall showed a positive tendency. This time the greenback gave 0.9% of its value, being outperformed by all of its major counterparts, but losing the most relative to the New Zealand Dollar (-1.95%).




However, the decline in the Dollar’s index was not gradual. For the most part it came from the weekend gap that appeared throughout the buck’s crosses as a result of Larry Summers withdrawing from the race to becoming the next Fed chairman and thereby solidifying the case for an extended period of easing, since he was a notable proponent of soon tapering of the programme.
On average, Monday opening prices (for USD crosses) were 0.7% lower than Friday closing prices, reflecting a major shift in the sentiment the event brought along with it. Accordingly, a subsequent rally this Monday should rather be treated as a correction than a reversal; also because there were no fundamentally important news that could have changed the trend by 180 degrees.

Highlights of the latest Marker Research release on JPY.

Full research available here.



Just like many other currencies the Japanese Yen stayed largely immovable the first two days of this week due to the FOMC statement that lay ahead. Before the weekend Asian currency was significantly more mobile, reacting strongly to the changes in the general sentiment in the market, which in turn benefited riskier currencies and forced safe havens to decline. Afterwards Yen’s equally-weighted index did make a few corrections amid the Eurozone data on economic sentiment (Sep 17) and BOE meeting minutes (Sep 18) before the major event, but the changes in Yen’s valuation remained minimal.





A completely another picture was observed in the aftermath of the FOMC statement, as already weak position of the Japanese Yen was aggravated even further. However, surprisingly more dovish than broadly expected stance of Ben Bernanke influenced the Yen in a different way from its impact on the U.S. Dollar, Aussie and kiwi, where the new information was priced in immediately. The change in the Japanese Yen was significantly less sharp, but at the same lasted for a substantially longer time period, stopping only in the middle of the next day. Then the focus of the investors shifted due a sequence of positive data on the U.S. economy, namely growth of the home sales, improvement in the manufacturing sector and lower-than-expected unemployment sales, as a result the price of the buck was lifted.

Highlights of the latest Marker Research release on EUR.

Full research available here.



Last week the common currency demonstrated an example of stability by deviating the least from its base value throughout the five-day period. While the major currencies were noticeably reacting to the economic events that have taken place since Sep 16, the Euro remained completely unaffected by any of the happenings. Even the FOMC statement, that cut the equally-weighted index of the U.S. Dollar by a whole percent in just an hour, was unable to move the average value of the single European currency at all. At the same time the New Zealand and Australian dollars gained because of the dovish comments by the Fed’s chairman.






With only Thursday’s context in the background the Euro’s price managed to rise. However, there were literally no events directly associated with the Eurozone. Accordingly, it is likely that depreciation of the Japanese Yen and the British Pound, respectively caused by Kuroda’s speech and poor retail sales data in the U.K., enabled a shallow but nevertheless rally of the Euro that day.
On the whole the Euro became expensive the most relative to the Japanese Yen (+1.7%), Canadian Dollar (+1.3%) and U.S. Dollar (+1.2%), though the advancement was largely negated by the outperforming Swedish Krona and New Zealand Dollar that benefited substantially from the risk-on sentiment.

Highlights of the latest Marker Research release on USD.

Full research available here.



Perhaps the most interesting developments are observed in the correlations between the USD crosses. It was clear that the FOMC statement would strengthen these links, but at the same time it seems nearly impossible to estimate to what extent and how long will the event be relevant. This is when the average correlation coefficient may be of help, as this measure is a proxy to the currency’s significance in the foreign exchange market. It tends to rise when the degree of consistency in the currency’s crosses is on the rise and vice versa.




Thereby the average coefficient skyrocketed from 0.23 up to 0.92 on Wednesday and remained elevated for two whole days, meaning that the U.S. Dollar took the lead and was the main determinant of the exchange rates in the market.
After the weekend, on the other hand, there was no trace left of this event. The average coefficient went back to 0.3-0.4, signifying the importance of the greenback returned back to the decreased levels and this currency no longer at the forefront, as, for example, are the cases for the Japanese Yen and New Zealand Dollar, though high significance levels of the former are considerably more stable than for any other currency, but may also come under pressure from time to time.

Highlights of the latest Marker Research release on CHF.

Full research available here.



The equally-weighted indices of the Swiss Franc and the Euro continue to share similarities, a tendency that is expected to hold given the current conditions, namely a 1.20 cap for EUR/CHF. However, the end values differed quite substantially, though both were indexed to 100—the Franc appreciated 0.5%, but the single European currency finished the five-day period at the level it was on Sep 20. A day-by-day analysis reveals, this was only due to the events on Monday, the rest of the time these currencies behaved perfectly the same, rising and falling together.





One of the reasons for such a notable deviation in the link between the Franc and the Euro from the norm most likely lies in the fact that the SNB Chairman speech was scheduled on the first day of this week. And even though the commentaries of Thomas Jordan did not prove to be significant in the end, the usual rhetoric was simply reiterated, it does not deny that his words may have a powerful impact on the value of the currencies. On the contrary, now there is even more evidence that such events are closely watched by the markets and leave their trace on the exchange rates even if the potential does not get to be fully realised.

Highlights of the latest Marker Research release on EUR.

Full research available here.



The current context for the common currency appears to be ambiguous, as its equally-weighted index did not follow a particular tendency throughout the last five trading days, but was oscillating around the base level. At first the Euro-bulls were discouraged by weak Eurozone manufacturing and German economic climate data, leading to a 0.5% depreciation. However, the situation started to improve when German consumers, unlike businesses, turned out to be more confident than a month ago.



The major currencies the Euro managed to outperform last week were SEK (+1%), NZD (+0.6%) and AUD (+0.5%). The first one was mainly weighed upon by disappointing Swedish consumer confidence published on Sep 25, then the Krone on average across the markets lost 0.7% of its worth. The second one suffered from widening trade deficit in New Zealand.

In the meantime, the only tendency that proves to be the most stable in the crosses of the Euro is outperformance of the Japanese Yen, which has already went up by 1.8% with respect to the single currency against the background of increasing worries over the Italian political situation and the U.S. debt limit issue, since both factors contribute immensely into the risk-aversion.

Highlights of the latest Marker Research release on USD.

Full research available here.



For the period Sep 25 - Oct 1 the U.S. Dollar was the second most bearish currency after its Northern counterpart, which depreciated by 0.7%, but lost only 0.4%, although there are two impending issues that remain unresolved, namely the government shutdown and looming debt ceiling that may damage the current recovery of the world’s largest economy. Last week the currency’s index largely stayed unchanged, showing no visible reaction to the releases of goods orders, home sales, GDP growth rate and even unemployment claims.




After the weekend, however, the fluctuations of the index became wider and at the same time with a significant skew to the downside due to the uncertainty and potential risks surrounding the mentioned topics. The emerging bearishness was specifically pronounced early Tuesday, when the currency gave up 0.7% of its value within the first six hours. Nevertheless, the dip was partially negated later in the day when the data on the U.S. manufacturing turned out to be more positive than expected, lifting some of the pressure off the Dollar.
Meanwhile, in the longer-term perspective of the last 20 days, the U.S. Dollar was the worst performing currency because of the postponed tapering, being currently 3.1% cheaper than a month ago.

Highlights of the latest Marker Research release on GBP.

Full research available here.



The data shown by the United Kingdom during the last five days were largely showing a positive tendency in the economy, although the pace of the improvement lagged behind the broad expectations, a fact that should have put some pressure on the price of the Sterling. Still, the British Pound was kept buoyant by the weakness of the U.S. Dollar, which dragged the loonie along, and by the softness in Australasian currencies, which failed to commence a robust rally in light of the uncertainty in the market, even though the signs that fundamentally the situation is improving are present.






The first three days of this week the fluctuations of the equally-weighted index of the Pound appeared to be wider than usually. However, it was Sep 27 and Oct 3 when the currency was moving the most. In the first case the Sterling joined a group of the safe haven currencies, namely JPY and CHF, and on average advanced 0.76% relative to its main counterparts.
The second case, on the other hand, was characterised by a precipitous fall of the Sterling’s value, which was associated with ubiquitous strengthening of the single European currency, a tendency that started after Draghi’s speech a day earlier, although the same words in his earlier discourse had completely the opposite effect.

Highlights of the latest Marker Research release on EUR.

Full research available here.



Last week the Euro was one of the most buoyant currencies in the market, as on average it managed to increase the value throughout the main crosses by 0.3%, while the British Pound and the Swiss Franc equally-weighted indices respectively declined 1.4% and 0.5%. The only currency that was able to outperform the Euro (by 1%) was the Australian Dollar, which strongly benefited from RBA’s reluctance to cut the rate coupled with the improving sentiment in the region. And even though Wednesday’s data negatively impacted the Aussie, the currency continued to recover afterwards.




In the meantime, the news flow that directly relates to the well-being of the Eurozone and therefore to the worth of the common currency was mixed. While the unemployment rate and retail sales surprised on the upside, inflation and producer prices did not meet the expectations of the market.
ECB’s press conference in the middle of the week seemed to be a turning point for the Euro, as Draghi’s constant reminder that the central bank stands ready to rescue the bloc, pushed the price of the currency upwards. However, the positive effect of the ECB’s commitment to help the recovery already appears to be wearing off, since on Friday the Euro lost some of its positions.

Highlights of the latest Marker Research release on USD.

Full research available here.



On the whole the U.S. Dollar continues to decline at a gradual pace. Within the last 20 days it lost two percent and is the second most bearish currency after the Canadian Dollar, which in turn is 2.3% cheaper than a month ago. The main bearish factor during the past five days was the non-farm employment change that disappointed the market and made the Dollar slide 0.4% on Oct 2, whereas the better-than-expected unemployment claims failed to restore the confidence of investors and the equally-weighted index of the currency remained unchanged.




Somewhat surprisingly, but a scarcity of the news coming from the United States because of the government shutdown benefited the value of the Dollar. It has almost completely offset the negative effect of the uncertainty associated with the resolution of the budget and debt ceiling issues.
Some of the ambiguity regarding the world’s largest economy was reduced on Oct 8. Then it turned out that Janet Yellen, the current vice chairman, is likely to take Bernanke’s place in leading the Federal Reserve. However, she is a renown proponent of stimulative measures and her nomination should have had a downward pressure on the currency, but for now seems to be a Dollar-positive event.

Highlights of the latest Marker Research release on JPY.

Full research available here.



At first the value of the Japanese Yen grew on the back of positive economic data and unwillingness of the Bank of Japan to increase the stimulus. The Yen even withstood a strong blow from a contraction of the current account surplus late Monday and continued to stay above the starting point, maximally being 1.1% more expensive than at the very beginning of Oct 4. However, the FOMC meeting minutes, coupled with the announcement that Janet Yellen is to become the next Fed Chairman, substantially increased attractiveness of the U.S. Dollar and thereby introduced significant changes into the behaviour of the Yen, which declined as a result.





The most the Yen underperformed relative to the Aussie (1.5%) and Kiwi (1%), both of them rose despite the uncertainty in the market, and relative to the U.S. Dollar that does not turn off the bullish path and increases in worth amid a lack of economic reports, such as the non-farm payrolls. The only currency the Yen significantly outpaced was the Swedish Krona—the pressure on the currency due Riksbank’s dovish comments last Friday was exacerbated by a lower-than-expected rate of inflation and disappointing growth of industrial production.
Interestingly, the Yen reacted to the FOMC statement on Sep 18 in exactly the same way, namely with a prolonged dip, even though the effect on the U.S. Dollar was the opposite. Then the currency was closing notably lower for two consecutive days.

Quarterly Report, Q4 of 2013

Dear traders,

We have just entered the last quarter of this year, but we have already run into events that are sure to keep the investors on their toes for a prolonged period of time. Even if these questions, namely, the U.S. government shutdown and the upcoming deadline to raise the debt ceiling, are to be resolved in the nearest future, they are sure to leave a notable trace in the financial markets. This will again highlight the importance of the political factors, which have been increasingly significant as of late, and not only in North America, but throughout the world. And even though the foreign exchange market seems to be slow to react for now, as the volatility remains fairly low at the moment, the rising Treasury yields as a result of the increasing possibility of a default and the postponement of the QE3 tapering are already changing the way how the currencies behave.

In the meantime, Dukascopy Bank SA seeks to broaden the opportunity horizon for its clients and has already received a Securities Dealer License during the last quarter. It will allow us to extend the scope of financial instruments being offered through the contracts for difference and enable you to take advantage of the latest developments in the world economy.

As for this particular issue of the Quarterly Report, in addition to our traditional sections, we have also included a section which sums up the view of our FX Community members on the major tendencies in Forex; you may already know it as Community Forecasts. We would like to use this opportunity to express our gratitude for their participation and welcome all of you to take part in our periodic releases.

September Release of Dukascopy Bank Sentiment Index

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Summary
- The six-month and three-year global economic expectations improved in September, a Dukascopy Bank SA poll showed. The six-month economic sentiment index advanced 0.06 to 0.59. The three-year economic outlook improved 0.02 to 0.67, after declining to 0.65 in August.
- Respondents became more optimistic about the six-month and three-year European economic outlooks in September. The six-month economic sentiment index advanced 0.08 to 0.49, the highest reading since records began in 2011. The three-year outlook climbed to 0.58.
- The North American economic outlooks also improved. The six-month and three-year indices climbed to 0.67 and 0.72, up from 0.66 and 0.71, accordingly.
- The Asia-Pacific six-month month and three-year economic expectations rose to 0.63 and 0.73, respectively.
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Economic outlook (term structure)
Figure 3 presents the term structure of the Dukascopy Bank Sentiment Index (Y-axis) mapped against GDP growth forecasts made by poll respondents (X-axis). Overall, DBSI values and GDP growth forecasts match directionally, suggesting the global economy will perform better three years from now.
Respondents revised the European six-month and three-year economic growth forecasts to 0.47% and 1.33% in September, from -0.10% and 0.90% respectively in August.
Poll respondents suggest that the North American economy will expand an annualized 1.40% six months from now and 2.13 three years from now.
The Asia-Pacific economic growth projections are the most prominent. Experts forecast growth of 3.07% and 3.93% six months and three years from now respectively.
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Economic development stages
Figure 4 presents the business cycle and its phases - expansion (real GDP is increasing), peak (real GDP stops increasing and begins decreasing), contraction or recession (real GDP is decreasing), and trough (real GDP stops decreasing and begins increasing).
Respondents are divided on the European six-month EDS. Thirteen claim the economy will be in a recession while fourteen say the economy will be expanding.
Experts support the view that the North American economy will be expanding both six months and three years from now.
Experts are united about the Asia-Pacific 3-year EDS – twenty six experts forecast expansion and three say the economy will reach its peak.
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Six-month economic outlook
Figure 5 shows the six-month economic outlook for Europe, North America, and Asia-Pacific. The global six-month economic prospects ameliorated 0.06 to 0.59 in September.
The European six-month economic sentiment index advanced 0.08 to 0.49, the highest reading since records began in 2011. Six respondents (20%) are pessimistic about the economic outlook, eighteen (60%) say the outlook is “neutral” and the rest (20%) claim the outlook is “positive”.
The North America six-month economic prospects improved to 0.67 from 0.66 in August. Twenty two experts (73%) claim the outlook is “fairly” or “definitely” positive and five (17%) suggest the economic outlook is “neutral”.
The Asia-Pacific sentiment index rose to 0.63, up from 0.53 in August. Fourteen respondents (47%) are either “fairly” or “definitely” positive about the six-month economic outlook. Eleven (37%) say the outlook is “neutral”.
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Economic outlook comparison
Figure 9 presents a discrepancy in views on the economic outlook among local and foreign experts. September poll results reveal that respondents from North America are less optimistic about the local economic outlook compared to their foreign colleagues.
Europe: Local experts are significantly more optimistic about the European six-month economic outlook compared to their foreign colleagues, with a discrepancy in views of 0.20. The discrepancy sheds to 0.11 for the three year economic outlook.
North America: Respondents from North America are less optimistic about the regional six-month and three-year economic growth prospects (0.55 vs. 0.73 and 0.58 vs. 0.79, respectively).
Asia-Pacific: Local respondents are less optimistic (0.58) about the Asia-Pacific six-month economic prospects compared to foreign experts (0.65). The discrepancy in views reverses to a positive 0.04 for the three-year economic outlook.
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Highlights of the latest Marker Research release on EUR.

Full research available here.



Although there were no fundamental reasons for the Euro to gain value lately—most of the data were either in line with the expectations or surprised on the downside, the equally-weighted index of the single European currency still went up by 0.3% within the past week, closing lower only Wednesday and preserving the upward momentum throughout the rest of the days. The main contributor into the Euro’s success was its cross with the Japanese Yen that has advanced nearly 1.3% since Oct 7, mostly after the FOMC meeting minutes had been published (on average the Yen has lost 1.5% between Oct 9 and Oct 11).





Nevertheless, we would rather view weakness of the common currency’s main European counterparts as a reason for its bullishness, namely underperformance of the British Pound and the Swedish Krona, which made the Euro relatively attractive. The former currency suffered sizeable losses (-0.8%) after the U.K. manufacturing production posted a 1.2% decline in lieu of a modest gain. The latter currency plummeted 0.9% in a matter of few hours following the industrial production sector being reported to contract by a greater percentage (-6.9%) than initially expected (-5.2%). However, the Sterling (+5.5%) still remains more bullish than the Euro (+4.7%) in the perspective of the past six months.

Highlights of the latest Marker Research release on USD.

Full research available here.



In the middle of the last week the U.S. Dollar received a substantial boost after the FOMC meeting minutes, which the market interpreted as committee’s desire to start tapering this year. Accordingly, this was a Dollar-positive event, amid which the currency on average appreciated 0.7% in the market, leaving most of its main counterparts (except for the Australasian currencies) far behind. The optimism and the respective increase in demand for the greenback was also provided by the news that Janet Yellen is to become the next Fed head.





However, the following trading days the U.S. Dollar performed poorly compared to its rivals, and the equally-weighted index erased nearly all of the previous gains. From the one side the sell-off was triggered by the looming uneasiness in the market associated with the inability of the U.S. politicians to make final decisions on the country’s budget and debt limit, which might even compromise the ability of the world’s largest economy to honour its obligations. From the other, the latest data, such as the initial jobless claims and consumer sentiment, surprised to the downside, meaning the Federal Reserve members will be pressured to reconsider their previous statement and postpone the start of reduction of monthly asset purchases, possibly until the next year.