It started off with prediction that US QE would come to an end, with the world largest economy picking up.
And China would depeg the yuan.
The first prediction did not come true. Far from it. US economy was in a state of malaise and there were talks about QE3.
China loosened its peg, not a one-time off agressive type that US hoped, but a gradual one with a widening of its band. Y-o-y, onshore yuan was up 3.43% against USD during 2010. China also opened up an offshore deliverable yuan market in Hong Kong in Jul 2010, not long after it announced the loosening of the yuan. This is a historic move and a first step towards the internationalisation of the yuan.
EUR sovereign crisis came as a rather surprise episode and induced some panic in the market at some point of time. The euro was bruised badly, with USD/EUR hitting a low of 1.1923 on 7-Jun-2010 but took an unexpected reversal trend after that. Greece was the first to receive IMF bailout with other regions like Spain and Portugal on the soon-to-join list. But market was quick to put this aside and moved on. Then the Ireland bailout and downgrade of sovereign rating of Portugal reminded that trouble was still brewing. USD/EUR lost 6.81% in 2010.
Asia economies continued to boom. In fact, fear of economy overheating and inflation were inducing a series of policy tightening and rate hikes in Asia. MAS also announced that SGD would embark on a gradual appreciating trend against USD and loosened the USD/SGD policy band. SGD was up 8.5% against USD for the year. JPY also rose to historic high against the greenback, forcing BOJ to intervene directly to stop the yen from rising. A series of competitive devaluations in other economies ensued and made its way to the top of G7 meeting agenda. JPY gained 12.52% against USD and reaching a low of 80.4 in 2010.
Overall, USD rose 2.12% during the year, on the DXY index. This was mostly supported by the weakness of the EUR.
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