U.S. Dollar Finishes Higher Against Yen, but Lower Against Other Major Currencies

The selling pressure against the U.S. Dollar started early last week with the Greenback breaking sharply against a basket of currencies in a continuation of the move that began the previous Friday in reaction to the weaker-than-expected U.S. Non-Farm Payrolls report.

The catalysts behind the weakness were persistent worries about a potential trade conflict between the United States and China and as the Euro rose following comments from European Central Bank President Mario Draghi that were deemed supportive of the common currency.

The U.S. Dollar fell further on Tuesday and early Wednesday on concerns that U.S.-Russia relations could worsen over the situation in Syria. Dollar traders responded negatively to comments from U.S. President Trump who promised quick, forceful action in response to a suspected chemical weapons attack in Syria, appearing to suggest a potential military response.

The Greenback reached its low of the week on Wednesday in response to upbeat comments from President Xi Jinping of China which seemed to ease tensions over a potential trade war with the U.S. The market was further supported by hawkish minutes from the U.S. Federal Reserve’s March meeting.

The Fed minutes showed Federal Reserve officials at their most recent meeting saw an economy growing at a strong pace and inflation moving up as well, justifying continued interest rate increases.

The meeting summary noted that “all participants” expected both the economy to strengthen and inflation to rise “in coming months.” The general sentiment likely fuels belief that the Fed will continue on its path of rate hikes.

June U.S. Dollar Index futures settled at 89.503, down 0.279 or -0.31%.

In other news, U.S. producer inflation rose more than expected, however, consumer inflation disappointed.

Japanese Yen

The Dollar/Yen rose last week, mostly in response to rising U.S. Treasury yields and increased demand for higher risk assets. Investors seemed to set aside concerns over a potential trade war with China and a possible escalation of military activity in Syria. The unwinding of safe haven trades hurt the Japanese Yen despite the news that S&P Global Ratings revised Japan’s outlook to ‘positive’ from ‘stable’ on the view that a stronger economy set the stage for fiscal improvement.

Australian and New Zealand Dollars

The Aussie and Kiwi rebounded from early losses to post solid gains for the week. Short-covering and aggressive counter-trend buying helped boost the Forex pairs, mostly in response to the positive comments from China President Xi Jinping and an easing of the geopolitical risks amidst recent Syria conflict tensions.

The AUD/USD settled at .7759, up 0.0089 or +1.16% and the NZD/USD closed at .7351, up 0.0083 or +1.14%.

Increased demand for risky assets, led by a surge in global equity markets also helped boost demand for the Australian and New Zealand Dollars.