The US currency is only 0.5% below the opening level of the year, looking at the DXY dollar index and has been on a rising trend for most of the week. Whilst there are concerns with the turn in peripheral bond markets and the softer tone to equities this week, the FX markets have been in a 'risk-off' mood for most of the month to date, with the Brazilian real 5% softer and the Aussie nearly 3% lower. There's a debate to be had as to what extent this is down to the better US data and there has been more from Fed officials overnight suggesting that rates are likely to be raised before the end of 2014 – despite the previous pledge by the rate-setting committee. But equally key have been the perceived stretched valuations of some of the higher-yielding currencies, with Brazil being the most vocal and active in its fight against a stronger real. This week's moves suggest bond and equity markets are only just coming round to the FX markets' way of thinking.
Also in today's Daily Forex Brief:
- Tough times for the Aussie
- Ireland slippage
- Some perspective on the US jobs market