Look for more weakness in the U.S. dollar

The U.S. dollar has been under increased downward pressure ever since the Federal Reserve indicated that it was considering buying hundreds of billions in Treasury bond in a resumption of its program of quantitative easing in order to stimulate the slowing U.S. economic recovery. The pressure got a boost over the weekend from a speech and after-speech comments by Fed chairman Bren Bernanke.

Resumption of yen’s gains may force Japan to intervene again rather than admit failure

After an initial drop to a one-month low on September 15, the yen is now up 1% since the government intervened in order to drive down its price. The Japanese government put off intervening in the currency markets for so long that traders believe it now has no choice but to attempt again to weaken the yen. Abandoning intervention now would brand the policy a failure and remove any restraint on traders.

An unexpected thing that could stop this rally

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