The American dollar fell on Tuesday morning at London’s trading session, reacting to the U.S. Federal Reserve’s speech yesterday that it would start purchasing more risky assets such as investment-grade U.S. corporate bonds.
The U.S. Dollar Index that tracks the American dollar against a bouquet of other currencies dropped 0.14% to 96.5.
Global Investors and traders appetite for risk increased in momentum as the Federal Reserve aims to help the firms have easier access to cheap cash as well as facilitate market liquidity
Why tracking the dollar index is necessary; Individuals, businesses and currency traders assessing the U.S dollar in relation to other major currencies can gauge its relative value, and calculate the amount of dollars needed to process their payment obligations.
“It’s a dramatic turnaround…it just seems to reinforce that message that you shouldn’t and can’t fight the Fed here, and everything follows from that really,” National Australia Bank head of FX strategy Ray Attrill told Reuters.
However, USD/JPY pair kept its gains of about 0.16% to 107.48, with the safe-haven currency staying around its range since April and indicating that some investors remained cautious.
“The key question for investors and traders is whether the gains represent a change in sentiment or a short-term sugar hit,” CMC Markets’ chief strategist, Michael McCarthy, told Reuters.