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Dollar dives after Summers Withdraws

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US Dollar

The ‘Greenback’ has fallen beyond a seven-month low against Sterling and slumped to a two week low against the Euro due to the withdrawal of former Treasury Secretary Lawrence Summers from the race to become the next Federal Reserve Chairman. Summers withdrawal caused investors to dampen their expectations that the Fed will choose to taper its monetary easing programme this month.

Pound Sterling

The Pound strengthened for a second consecutive week against the US Dollar and has risen beyond a seven-month high after last week’s release of positive jobs and housing data added to signs that the UK economy is continuing to strengthen. Sterling also made gains against all but two of its most traded peers as the improving economic picture caused investors to increase their bets that the Bank of England will raise interest rates earlier than expected. The currency has advanced by 7.7% in the past six months making it the best performing developed nation currency.

The Euro

The Euro is trading higher against the broadly weaker US Dollar due to the reduced demand for safe haven currencies and as the withdrawal of Lawrence Summers from the race to replace current Fed Chairman Ben Bernanke weighed on Dollar demand. The Euro could see some volatility later in the session due to release of the Eurozone’s latest Consumer Price inflation data and a speech by European Central Bank President Mario Draghi.

The ‘Aussie’

The ‘Aussie’ has risen to a three-month high after demand for riskier assets was boosted after the US and Russia agreed on a deal to eliminate Syria’s stockpile of chemical weapons without the need for military action. Against the Japanese Yen the ‘Aussie’ strengthened further due to the Japanese markets being closed for a national holiday.

New Zealand Dollar

The ‘Kiwi’ jumped to a four-month high against the US Dollar due to Larry Summers withdrawing from the race to become the next Federal Reserve chairman. Summers were seen as the candidate most likely to have removed the Fed's stimulus faster than the other two, a move that would have weighed heavily upon emerging and commodity based assets such as the New Zealand Dollar.

Canadian Dollar

The Canadian Dollar climbed to a one-month high against its US relation due to the better-than-expected economic data released last week and as fears over a military strike against Syria faded. Expectations that the US Federal Reserve is now unlikely to taper its monetary easing programme have also bolstered the commodity based currency.

South African Rand

The Rand hit its highest level in five-weeks against the US Dollar and made gains against most of its peers as speculation builds that the Federal Reserve could keep its monetary easing programme in place, a move that would boost high-yielding emerging market currencies such as the Rand.

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