Daily Morning Report 20.12.2016

The dollar was bouncing back toward its 14-year high against a basket of major currencies on Tuesday as the yen quickly gave up some of its gains following deadly incidents in Turkey and Germany.

The dollar was helped in part by upbeat comments from Federal Reserve Chair Janet Yellen on the U.S. jobs market.

Expectations that the incoming Trump Administration’s planned tax cuts and fiscal spending could lead to higher U.S. growth and inflation has lifted U.S. bond yields and the dollar since last month.

The BOJ affirmed its twin targets of minus 0.10% interest on some excess reserves and the zero percent 10-year government bond yield.

Although that outcome was widely expected, the move appeared to set it apart from other major central banks that are scaling back stimulus.

The dollar’s underlying strength overwhelmed flight-to-quality buying in the yen and the Swiss franc following two separate deadly incidents in Turkey and Germany that raised security worries in the West.

Investors were rattled after the Russian ambassador to Turkey was shot dead by an off-duty police officer as the diplomat gave a speech at an Ankara art gallery.

Security fears deepened on news that a truck plowed into a crowded Christmas market in central Berlin, killing 12 people, evoking memories of an attack in Nice, France, in July, in which 86 people were killed.