With just an increase in U.S. debt yields, global currencies were significantly affected – not just the U.S. dollar. This caused a major forex pivot point with regards to most all currency pairs. As mentioned in a recent Reuters article (published August 22, 2013); the reason for such a global impact is “emerging markets, which rely heavily on cheap dollars to fund large current account deficits, were hit hard by the rise in Treasury yields.” This shows that when a forex pivot point occurs concerning the dollar, then there is often a very real economic impact on many nations.
As the forex pivot point is a useful tool for currency traders and economists to make prediction, the U.S. Fed also has their tools to try to affect the future strength of the dollar. Reported in Reuters article, “the [Fed] left unchanged market expectations that the central bank would be to taper its asset-buying program as early as next month. Also in July, Fed policymakers discussed a new tool to help manage an eventual retreat from its current loose monetary policy, helping the central bank drain cash from the banking system and maintain short-term rate targets.”
The value of currency is heavily assessed by its trade value – since currencies are traded in pairs in the forex market and a forex pivot point is when there is a change in direction of currency pair trade value. This means that as much as the U.S. dollar has an effect on other currencies, the same is true in the reverse direction. Chris Williamson, chief economist survey compiler of Markit, put the reasoning behind the euro´s strength is a result of “an increasingly buoyant-looking picture, with manufacturing seeing its best performance for a couple of years, and alongside that there's an improving service sector, so exporters are doing well and the domestic economy is healing.”
The forex market is constantly changing as it reacts to a dynamic global economy.