-Jane Foley is research director at Forex.com. The opinions expressed are her own.-
The final weeks of 2009 have brought a sense that tides may be turning in the foreign exchange market reflecting broader developments in the global economy. The predominant changes relate to the dollar.
December’s 5 percent recovery in the USD index is linked to an improved outlook for the U.S. economy.
There are risks to this optimism, but short dated U.S. yields have pushed higher since late November allowing the dollar to shrug off the downtrend that characterised it during 2009 and potentially embark upon a cyclical recovery; at least against some currencies.
Better U.S. economic data in early December couldn’t have come soon enough for the Japanese authorities. In late November USD/JPY had fallen to a 14-year low.