The dollar, already riding high against other major currencies, may rise further as economic and geopolitical factors coalesce with a supportive technical picture to underpin broad demand for the greenback. The Federal Open Market Committee will release its latest monetary policy statement later on Wednesday, but the expectation is that while much US economic data has been firming, the Fed are in no rush to talk about hiking interest rates. Slow US wage growth is held to be restraining the Fed.
The European Central Bank and the Bank of Japan would love to be in the Fed's shoes. Restoring the health of the euro zone and Japanese economies requires very different medicine. And one of the side effects may well be encouraging dollar demand versus both the euro and the yen.
While the Fed is contemplating whether or not to intimate US rates may eventually rise, the ECB has loosened monetary policy even further, cutting its benchmark rate to 0.15 percent and setting a negative deposit facility rate.
In pursuance of a 2 percent price goal, in April 2013, the BoJ pledged to double base money through aggressive asset buying.
That campaign is still under way and although Japan's core consumer inflation has risen steadily, the BoJ expects it to slow in coming months. Some analysts are already predicting the central bank may have to ease policy yet again.
Such divergent central bank monetary policy paths, in this case, arguably support a more broadly stronger dollar.
Geopolitically, the United States may have led the drive for Ukraine crisis-related sanctions on Russia but, following suit, the European Union and Japan probably have more to lose.
"The imposition by Tokyo of new sanctions on Russia ... inevitably threaten a whole range of bilateral relations, and set them back," the Russian Foreign Ministry said in a statement on Tuesday.
Investors might reasonably conclude that the depth offered by US asset markets is preferable to holding euros or yen as the crisis over Ukraine rumbles on.
Separately, burgeoning tensions across the Middle East might also prompt investors to favour the safety of US assets.
The technical picture may also support the case for a stronger dollar. The dollar index, which touched a fresh six-month high on Wednesday, closed on Friday at 81.029, comfortably above the base of its weekly ichimoku cloud at 80.686. Technical traders might now expect the move to continue towards the cloud's top, currently at 81.876, which was last seen on September 11, 2013.
Every which way, there seems an argument for some broader dollar strength even from current levels.
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