Dollar boosted by manufacturing figures

The US dollar is trading higher versus the Japanese yen after the US revealed strong manufacturing numbers.

The US dollar has been given a boost by the stronger-than-expected NY Empire State Manufacturing Index, a report which measures the level of manufacturing activity in New York state. Economists were expecting a reading of 0.4, and the report came in at 7.8 in June; this compares with -1.4 in May. Traders welcomed the news as it is an indication that the Federal Reserve’s policy of quantitative easing is working.

The Fed will give us an update on Wednesday at 7pm (London time). Some traders believe that the central bank may reduce the size of the stimulus package; if the Fed drop any hints about this we might see further dollar strength.

The US dollar has dropped 8% versus the Japanese yen in the past month, though it is still up 12% over the last six months. At the end of last year, the Bank of Japan (BoJ) announced an aggressive monetary easing plan, which is why the yen has lost so much ground versus the US dollar. If the BoJ reveal additional monetary easing plans, we could see the US dollar trade higher versus the Japanese yen once again.

Spot FX USD/JPY chart

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