Discount Rate Surprise Fuels Dollar Rally

The dollar touched the highest level in 2010 versus several important currencies this Thursday as the Federal Reserve raised its bank discount rate for loans, spurring demand for assets in the country as the economy seems to be picking up, allowing the nation’s central bank to lift stimulus.

All of the 16 main traded currencies dropped versus the greenback after the Federal Reserve announced a discount rate hike for direct bank loans, being that the first raise in 3 years, which provides support for the theory that the economic improvements in the U.S. will allow the nation’s central bankers to lift stimulus and raise interest rates at some point this year, allowing the dollar to become more attractive in foreign-exchange markets. Several positive economic reports marked this week in U.S. financial markets, allowing the dollar to gain also versus higher-yielding currencies like the Australian dollar and also safer refuges like the Swiss franc and the Japanese yen.

The Fed’s hawkish tone and attitudes are bringing optimism towards the U.S., as the country’s economy seems far better than other important economic regions throughout the world as Europe and the South Pacific. As mentioned in previous dollar related articles, the dollar trend is bullish as long as this scenario remains unchanged.

EUR/USD traded at 1.3464 as of 00:04 GMT from a previous intraday rate of 1.3600. GBP/USD fell to 1.5430 from 1.5681.

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