Despite a shadow having been cast on Western economies over the last five years as a result of the global financial crisis in 2008 in which unserviceable debt resulted in the nationalization of many of Britain’s banks and sweeping, nationwide home loan foreclosures in North America, the US dollar is not just on its road to recovery, but ended 2014 as a tour de force among currency units.
Commercially, the United States picked itself up, with major manufacturing giants such as Ford and General Motors turning their fortunes around post-bankruptcy, with the large facilities of Michigan and Ontario producing fine products in large numbers, and the housing market has begun to return to some degree to a comfortable level, whereas unemployment is decreasing.
The most remarkable aspect over recent months, however, is the confidence that the global trading industry has in the dollar, which rose to its highest value in five years as 2014 gave way to 2015.
The Bloomberg Dollar Spot Index strengthened 0.4 percent at 1:30 p.m. in Hong Kong. The yen retreated 0.6 percent and the euro headed for its lowest level since June 2010. Standard & Poor’s 500 Index futures increased 0.5 percent.
Bonds of Kaisa Group Holdings Ltd. plunged to record lows after the Chinese developer defaulted on a loan. Crude in New York advanced 1.2 percent, following its biggest annual loss since 2008. Silver gained 1.5 percent, while tin fell 0.7 percent.
Furthermore, when considering the currency’s performance during the course of the entire year, the dollar had experienced its best year since 2003.
The U.S. currency touched a new 2½-year high against the euro and gained versus the yen in holiday-shortened trade, with investors wagering the dollar will continue its ascent against both in 2015.
The dollar rose 0.3% versus the Japanese currency in late-afternoon trade, to 119.79 yen, and gained almost 14% in 2014. The euro fell 0.5% to $1.2099, falling below $1.21 for the first time since July 25, 2012. For the year, the euro lost almost 12% versus the greenback.
According to the Wall Street Journal, investors rushed into the dollar in the second half of 2014, confident that stronger U.S. economic data would persuade the Federal Reserve to raise interest rates from near zero for the first time since before the financial crisis. At the same time, anemic growth and inflation in the eurozone and Japan forced their respective central banks to ease monetary policy, taking measures that ultimately weakened their currencies.
These results confirm the confidence displayed in the dollar by large FX companies, with MONEX Group having recently published the results of its Fifteenth Global Retail Survey, demonstrating that a majority of those surveyed were convinced that the dollar will be the currency to place faith in over the next few months.
In mid-December, LeapRate reported that the dollar had been experiencing its highest values in eight years, but that traders had become cautious as the value of the dollar’s net long position slid by more than $7 billion to $34.64 billion in the week ended Dec. 16, from $42.19 billion the previous week. This was the smallest net long position on the greenback since late September.