From the March 2013 Special Report issue of Treasury & Risk magazine

Dollar’s Swings Could Continue

Europe’s fiscal crisis, Japanese monetary policy fuel FX volatility.

The dollar has undergone some big moves against the euro and yen in recent months, and foreign exchange analysts say there could be more swings in the months ahead given continued uncertainty about Europe’s fiscal crisis, changes in Japanese monetary policy and the U.S. federal budget deficit.

“Global geopolitical maneuvering and central bank thinking has certainly allowed volatility to make [foreign exchange] trading very interesting,” said Dean Popplewell, director of currency analysis and research at OANDA, a provider of online foreign exchange trading.

Tod Van Name, global head of FX, economics and commodities at Bloomberg, argued that as concerns about Europe subside, “the focus is going back to what’s really going on in the global economy.”

“When investors have a greater appetite for risk,” Van Name said, and as the attraction of U.S. currency’s safe-haven status wanes, “there’s a tendency for the dollar to weaken.”

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