Dollar Extends Post-Cliff Gains

The U.S. dollar recovered further Thursday, reversing losses made immediately after Washington lawmakers clinching a deal to undo or delay much of the fiscal cliff.

The ICE dollar index  reclaimed the 80-point level during Asian trading hours, rising to 80.026 from 79.847 in late Wednesday trade in North America.

The index, which tracks the U.S currency against six major rivals, had dropped to 79.393 shortly after the fiscal-cliff deal cleared its last hurdle by passing the House of Representatives.

Some analysts attributed the drop to investors selling the safe-haven dollar and buying currencies seen as riskier, given the increased certainty that the fiscal-cliff agreement brought.

As the greenback began to rebound during Wednesday trade, market participants suggested investors were looking toward other looming political battles over extending the U.S. debt ceiling and passing a budget.

But RBS analysts said the dollar may now be decoupling from its recent pattern of rising on bad news, and dropping when concerns ease.

“We’re witnessing a rare moment when the dollar is rallying along the global risk appetite. Although this has momentarily happened before in the past, it’s risky to dismiss this as yet another ‘cry wolf,’” they wrote Thursday.

Meanwhile, technical analysts at India Forex Advisors tipped near-term resistance for the dollar index at 80.20 level, with support back at the 78.90 handle.

Other major currency pairs extended their trends from late Wednesday, with the euro  falling to $1.3138 from $1.3177, after unsuccessfully testing the $1.33 handle in the wake of the fiscal-cliff deal.

The British pound  also added to its losses — falling to $1.6221 from late Wednesday’s $1.6249 — as did the Australian dollar , which slipped to $1.0487 $1.0498.

Likewise, the Japanese yen added to its losses, with the dollar  edging up to ¥87.26 from ¥87.24, setting new highs not seen since 2010.

Marketwatch