The Dollar advanced against the Yen and Euro on Monday as stabilizing financial markets raised optimism that the worst of the financial crisis might be over, encouraging some investors to buy riskier assets. Analysts said the dollar also got some support as traders were reluctant to buy the Euro ahead of the European Central Bank policy meeting on Thursday and the G7 nations' gathering late in the week. Global Dollars sentiment had improved but worries about the overall health of the US economy continued to cast a pall over the market. Data on Friday showed the economy shed jobs again in March for a third straight month.
Yesterday, EurUsd was down 0.15% at 1.5705. UsdJpy gained 1.03% to 102.54, after earlier spiking to 101.51. UsdChf was up 0.72% at 1.0134 rebounding from 1.0057 low. GbpUsd went lower to 1.9884 -0.23% after posting 1.9835 intraday low.
The Dollar's gains overnight were also supported by reports of Japanese pension funds buying overseas assets as they start their new financial year, said analyst.
Central bankers and finance ministers from the Group of Seven rich nations meet in Washington later this week and are expected to discuss a broad range of proposals aimed at restoring confidence in the battered banking system. These measures would be seen as boosting the Dollar, which has been pressured by aggressive monetary easing by the Federal Reserve. Analysts confirmed that ahead of the G7 and ECB (meetings), people are not going to get aggressive in terms of buying the Euro and nobody really knows what comment ECB President Jean-Claude Trichet will deliver for the strength of the Euro.
The Fed has slashed its benchmark overnight lending rate by 3% to 2.25% since mid-September, wiping out the Dollar's yield advantage against the Euro. The ECB is widely expected to leave its key rate on hold at 4%, while the Bank of England, which also meets on Thursday, is seen cutting rates by 25bp to 5%.