USD/JPY Winning Streak Continues, Dollar Index Sets 13.5 Year High

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The dollar was higher against the yen for a third consecutive week as the persistent risk-on trade in U.S. equities coupled with the outlook for higher U.S. interest rates drove USD/JPY to an eight-month high of 113.89, a gain of 2.0% from last Friday’s close. The post-Election Day rally continues to generate demand for the greenback amid expectations that President-elect Donald Trump will initiate a policy of fiscal spending that will likely be offset by higher U.S. interest rates.

The euro’s unprecedented losing streak briefly came to an end when the joint currency closed higher on Monday. Initial losses attributed to dovish comments from European Central Bank President Mario Draghi triggered bottom-fishing at 1.0578. But the bullish fundamentals for the dollar were in sharp contrast to expectations for the ECB to expand stimulus measures as soon as next month, and EUR/USD resumed its downtrade, slipping to a low of 1.0517. Thanks to modest gains on Friday, the euro closed nearly unchanged against the dollar, snapping a two-week losing streak.

With the dollar higher against most of the majors, the dollar index was higher for a third straight week, setting a 13.5 year high of 102.12.

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