It’s almost the end of the year and you know what that means - it’s time to look back and review the movers and shakers of the currency world! So which currency pairs dominated 2014 trading?
1. USD/JPY (+13.78%)
The yen traded in relatively tight ranges for most of the year after traders have priced in Shinzo Abe’s new stimulus policies in 2013, plan to which the BOJ had stuck to like glue. In fact, it wasn’t until Q3 2014 when yen bears pushed their pedals to the metal.
It was around mid-August when disappointing reports from Japan started piling up, enough to strengthen calls for the BOJ to do something. And in October, BOJ Governor Kuroda made good on his threats to do more if their inflation goals were challenged by not only increasing the pace of its easing, but it also downgraded its inflation forecasts AND hinted at another tax hike. Good night Japanese yen!
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2. EUR/USD (-9.45%)
No currency-related list would be complete without the usual drama around the shared European currency. The euro was actually bound in wide ranges for the first half of the year despite the impact of the Russia-Ukraine conflict and Draghi’s early threats of negative deposit rates.
It wasn’t until late May to early June when the ECB made good on its threats that the euro selloff gained momentum. Not only did the ECB cut its interest rates and dragged its deposit rate to negative territory, but it did it one more time in September when few analysts were expecting it! It also didn’t help that European trade, manufacturing, and overall growth levels were tanking in the region at the same time as the decline in the euro zone’s inflation levels.
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3. USD/CHF (+8.21%)
Newly-appointed Fed Chairman Janet Yellen didn’t waste much time boosting the Greenback in March when the Fed removed the unemployment rate threshold and upgraded its U.S. growth forecasts.
The central bank then went on to drain the last of its QE3 program as Uncle Sam’s economic prospects continued to improve. It also helped that a bit of risk aversion over geopolitical concerns sparked appetite for safe haven countries and their currencies. Right now the Fed is focusing on trying to working a rate hike in 2015 without causing too much disruption in the global markets. By the looks of USD’s price action, the Fed didn’t do a great job on the latter!
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BONUS: USD/RUB (+63.97%)
I don't usually write about the Russian Rouble (RUB) but this move is just too crazy to ignore. USD/RUB hit the ground running in Q1 2014 as Russia worked on annexing Crimea from Ukraine, a move that garnered economic sanctions from its major trade partners. Russia and Ukraine reached some sort of truce though, and USD/RUB dropped back to its January levels by late June.
It was in mid-July when the Russian economy really started to hurt from the economic sanctions. Oil prices also started dropping like there's no tomorrow, which isn't good since oil and gas make up nearly 70% of Russia's exports and 50% if its federal budget. Right now the pair is still making new record highs with no ceiling in sight.
