Dollar Extends Year-End Gains

The risk-on trade that elevated the dollar for the last two months of 2016 was in full swing at the start of the year as a rally in U.S. stock futures drove the dollar to a twelve-day high of 118.34 against the yen during the European session. USD/JPY was moving sideways at 117.35 during the Asian session with Japan closed on Tuesday, but sprang to life soon after the London open in concert with gains in European and U.S. equities on the heels of an unexpected improvement in a key Chinese manufacturing index. USD/JPY last traded 0.60% stronger at 118.19.

The dollar was also stronger against the euro despite upbeat German labor market data. Although the number of unemployed in Germany dropped a greater-than-expected 17,000, it failed to generate interest in the joint currency. EUR/USD turned south just under 1.0500 to below 1.0400, finding support at the 2016 low of 1.0352. The euro last traded 0.65% lower against the dollar at 1.0387 and is 0.70% weaker against the British pound at 0.8454.

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