On Wednesday the daily increase in the Dollar index was the highest in seven-month period | IFCM
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On Wednesday the daily increase in the Dollar index was the highest in seven-month period - 20.3.2014

As we predicted in previous reviews, the U.S. Dollar gained strongly to two-week high after the Fed meeting. On Wednesday the daily growth of its index (USDIDX) was the highest in seven months. Base rate in the USA remained unchanged at 0.25% as expected. Purchasing of government bonds was reduced by $10 billion per month. Fed Chairman Janet Yellen said that in six months after the completion of assets tapering program, the base rate may be increased. Forex market participants met these words with great optimism. They believe that such an increase could be held in April of the next year, but not in the second half of the year as previously assumed. We would like to remind that the low interest rates in the United States have been saved since 2008. During this time the Fed has issued to the U.S. economy $3 trillion through three programs of "quantitative easing" or assets tapering. American economists now believe that the issue of the Dollar will be finished at the end of this year. By 2016 the base rate in the U.S. could rise to 2.25% from the current 0.25%. In our opinion, optimism of economists is growing and it is positive factor for the Dollar. In December they were expecting a final rate increasing to 1.75%.



On the background of strengthened Dollar a logical weakening of the Euro was observed (down on the EURUSD chart). The Pound (GBPUSD) fell less than the euro, due to the positive statements made by the British finance minister George Osborne. He raised its forecast for GDP growth of the country for this year from 2.4% to 2.7% and in 2015,from 2.2% to 2.3%. The Bank of England expects that this year British economy will grow much more, by 3.4%.



The Japanese Yen (up on the USDJPY chart) weakened according to our expectations. According to the Ministry of Finance of Japan, last week foreign investors sold Japanese stocks by 1.1 trillion yen. We believe that they are afraid of the reduction of corporate profits after increasing the sales tax on April 1st. In 2013 Nikkei 225 (NIKKEI) increased by 57%, and since the beginning of 2014 dropped by 12%.

Quotes of the Gold (XAUUSD) fell to a three-week low amid positive the Fed statements regarding to good future of the U.S. economy and the stabilization of the political situation in Ukraine. Representatives of major Western banks believe that the Gold price can go into a long-term downtrend that will last as long as the U.S. government tapers assets and increases interest rates, i.e. till 2016. According to them, the base rate will rise to 1% from the current 0.25% by the end of next year.

Price of the Soybean (Soyb) may drop, as it became known that China is going to resell 360 tons of Brazilian soybeans in the United States. In China demand for the Soybeans decreased because of the mass destruction of poultry due to the outbreak of avian influenza. Previously, for the same reason China refused to purchase 600 tons of the Soybeans from South America.



Yesterday U.S. stock indices (DJI, SP500, Nd100) fell for the first time in three days. Expected increasing of the rate may have a negative influence on the stock market. In our opinion, the growth of interest on loans can reduce the attractiveness of such large manufacturing companies like Boeing (S-BA). Besides, it also has a "short personal negative factor" as the aircrash in Malaysia.
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