Dollar Hurdles in the Week Ahead

The US dollar faces several head winds in the days ahead that will likely conspire to cause it to fall in the days ahead.

The technical and fundamental tone of the dollar has deteriorated in recent sessions and further losses are likely in the week ahead. The fact that dollar was not bought on either goods news from the U.S. or poor news from Europe and Japan illustrates a potentially important shift in market psychology.

Yen Weakness Explained

One of the most puzzling developments in the foreign exchange market has been the persistent weakness of the Japanese yen.

Macro-economic fundamentals appear strong. Japan’s pace of growth puts it near the top of the major industrialized countries. Japan enjoys a booming stock market, with its year-to-date gain of 34% easily topping the G7. Moreover, the vast majority of those gains have been scored here in the second half. In terms of external although higher energy prices have eaten away at Japan’s trade surplus, its exports remain strong, having risen by almost 9% on a year-over-year basis.