US Dollar Index: up 3.65% for the year

The US dollar finished 2016 with gains against most of the G10 currencies but ended lower versus the Japanese yen. During the last session of the year, Greenback pulled back, extending a bearish correction but kept its bullish trend intact. 

Over the year, the US Dollar Index gained 3.70%. It bottomed in May at 91.80 and then bounced to the upside. After the victory of Donald Trump in November, it accelerated to the upside, gaining 4% since then. In December the DXY peaked at 103.57, the highest level in 14 years, boosted after the decision of the Federal Reserve to raise rates and FOMC projection of three rates hikes for 2017. It ended 2016 hovering around 102.00.

US dollar and stocks up

US bond yields finished the year higher, giving support to the US dollar rally. Yields projections point to the upside amid expectations of a higher fiscal deficit and higher Fed Funds rates. If that scenario materializes, the US dollar should continue to benefit according to most analysts. 

Despite the fact that main stocks indexes in Wall Street hit record high levels during 2016, the yen and the US dollar were among the best performers. Risk appetite did not weaken the greenback during 2016. The yen also finished higher but far from the highs. USD/JPY dropped momentarily below 100.00 (June) and then rose more than a thousand pips during the last two months of the year, erasing most of the losses of the year. 

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