Monday Morning Surprise: The Dollar Rises in European and Asian Market


The global economic market is starting to recover from this pandemic although investors still fear a slowdown. From the beginning of July, the U.S. Dollar was very unstable in European and Asian markets and finally, during the last week, the dollar had some strong gains. So, it’s more than clear now that the U.S. dollar remained its status of a safe currency despite everything that happened during the last year.

Although all those changes started last week, this Monday was the day when most of the thighs changed. Especially in the Asian market, or to be more specific — Japan. According to the U.S. Dollar Index that is used for tracking the dollar against all other currencies, the market opened slightly higher (92.142) than the previous closing (92.116) and by 08:45 AM it inched up to 92.245.

The Biggest Change

The biggest change definitely happened in the Asian market. In just a few days, the price of the U.S. Dollar rose compared to the Japanese Yen. If we go back to the last week and take the Thursday 8th as an example, the price of one dollar was 109.78 and today it’s 110.08. So, the USD/JPY pair rose to 0.01% this day.

Of course, this rise didn’t happen all of a sudden. Some things occurred and had a direct influence on the rise of the dollar today. According to some investors, the main thing that caused the change was the growth of Japan’s core machinery orders. Compared to the last year, core machinery orders rose by 12.2 percent and if we take a month-on-month analysis that percentage is 7.8, which is much better than expected. Of course, this is not the only thing that had an impact on today’s change, but it’s the one that is worth mentioning.

Now, it’s time to move on from Asia to other parts of the world, since the USD has risen all across the globe. The USD/GBP pair opened for 0.7192 and until 10:45 it got up to 0.7214. In the European market, the dollar went up to 0.8481 and that’s exactly what gained the most attention among investors.

The Focus on the U.S. Inflation

The main focus now is turned to U.S. inflation. We still need to wait for the U.S. core consumer price index (CPI) to be released (scheduled for July 13, 2021, at 8:30 A.M. Eastern Time) to see what will happen next, but according to Shinichiro Kadota (Barclays senior FX strategist), if the data is strong enough, we could expect to see Fed’s current forecast of 2023. But the thing is, if the data shows that inflation is more persistent than experts predicted, the Federal Reserve will have to boost the dollar even more by asset tapering.

As you can see, the dollar found its way to the top once again. The growth is slow but steady and even if we compare it to the cryptocurrencies, there are some small movements. Of course, this doesn’t mean that by next Monday those movements won’t be big ones. Forex is an unpredictable market and it’s yet to be seen what will happen to the U.S. dollar and will this new Delta variant of COVID-19 influence some new changes.

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