“The dollar surged against counterparts worldwide ranging from Australia’s currency to Turkey’s lira as the Federal Reserve’s signal it is getting closer to reducing monetary stimulus pushed volatility to the highest in a year and spurred losses in carry trades.
The U.S. currency strengthened versus all of its 16-most-traded peers and Deutsche Bank AG’s G10 FX Carry Basket index fell to the lowest level since October as Fed Chairman Ben S. Bernanke yesterday outlined the case for reduced monetary stimulus this year if the U.S. economy keeps improving. India leads carry losses among the 31 most-traded currencies versus the dollar this month with a 4.8 percent decline while its central bank likely intervened to protect the rupee.
“QE3 is now likely to end in the middle of next year so we’ve had an initial rise in the dollar,” saidGavin Friend, a currency strategist at National Australia Bank Ltd. in London, referring to quantitative easing, or QE. “People are reading this as the end the cheap money that’s gone intoemerging markets from the U.S. and Europe. If today’s U.S. data is reasonable, the dollar will continue to rally against currencies like the Aussie in particular.”
The dollar rose 0.6 percent to $1.3211 per euro at 8:01 a.m. in New York, extending the biggest two-day gain since July 6, 2012. The U.S. currency advanced 1.5 percent to 97.86 per yen. TheJapan’s currency fell 0.9 percent to 129.39 per euro.
