After the fears of a possible US military strike on Syria abated, the major currencies like Euro and Yen lost their ground against the Dollar. Now, the markets seem to have shifted their focus on economic fundamental data for direction, as the speculations on Fed QE tapering again took center stage.

On Thursday last week, the Dollar index, the gauge of Dollar strength against the major trading currencies, was at 81.95 after posting a high of 82.04. The USD/JPY recovered from its low of 97.44 Yen to hit a high of 98.50 Yen. Against the Euro the greenback climbed to $1.3218, its highest in past 2 weeks. The pound too slid against the Dollar to trade at $1.5495.

On Friday weekend, the Dollar index extended its gains as it edged up to 82.02. In line with this trend, Euro fell against Dollar to $1.32365, while the EUR/JPY pair climbed up to 129.76 Yen from previous low of 129.59 Yen.

The major currencies like Euro and Yen were riding on the Syrian crisis to appreciate against the dollar last week. After the delay in the military attack on Syria, the concerns abated taking away the support for these currencies. Also, the US GDP rose by 2.2% beating expectations of a 1.7% increase. The US consumer consumption advanced by 1.8% in the 2nd quarter, while the jobless claims dropped significantly by 6000 to 331,000, beating estimates of 337,000.

Moreover, the Eurozone posted downbeat data, as the German unemployment rose by 7000 to 2.95 million, against the predictions of a decline by 5000.  The European inflation rate too dropped more than expected to 1.3% from previous month’s 1.6%. This will force ECB to continue its monetary stimulus, as inflation is still below the 2% target and this consequently weakened the Euro.

On Monday this week, the Dollar index soared to hit a one-month high of 82.331, its highest level since Aug 2 this year. The greenback advanced by 1.2% against the Yen to 99.38 yen, its highest since the August 2 peak of 99.955 yen.

Later, on Tuesday, Dollar continued its rally as the Euro dropped by 0.2% to $1.31635, its lowest since July 22, with the Dollar index edging up by 0.36% at 82.379. The Yen too followed suit and dropped by 0.2% as the USD/JPY pair traded higher at 99.54 Yen.

The possibility of a swift military attack eased as the UK parliament voted against its participation in the attack on Syria. This has also led Obama to seek a congressional approval for the US attack, increasing the possibility of further delay or a drop of the military strike. Moreover, according to the Institute for Supply Management, the U.S. factory index is estimated to have risen to 54 near the two-year high of 55.4.

As the Syrian war panic abated, the support for Yen as a safe haven currency among investors weakened. The string of positive US data again turned the focus on the rising speculations over the Fed tapering its stimulus in September from $85 billion to $65 billion.

Meanwhile, in the emerging markets on Monday, the Indonesian rupiah declined by 0.5% to 11,036 per dollar, its lowest level in past four years since April 2009. The Indian rupee too fell by 1.2% to 66.8275 per dollar as of 10:23 a.m IST in Mumbai. The Bloomberg-JP Morgan Asia Dollar Index (ADXY), which is a gauge for the Asian currencies except the Yen, plunged to a low of 113.58 from its high of 119 in May this year. This is its steepest fall since September 2010.

Among the emerging economies, the Indian economy in particular is battling with GDP that grew only by 4.4% against a downwardly revised estimate of 4.7%.  Due to the rising yield of US treasury bonds, the FII had pulled out funds to the tune of $2.3 billion last month. This further worsened the country’s external debt-to-GDP ratio to its weakest in 12 years. This caused the rupee to fall by 8.1% last month, registering its biggest drop since March 1992.

Thus, with the Syrian war concerns alleviated the market now focuses on economic data from US and the Eurozone. Further, continuation of the Dollar’s rally against the other currencies will depend on the crucial Non-farm payrolls data and the policy meetings of European Central Bank and the Bank of England this week.