Posted October 17, 2010
US dollar works to rebound. Economic stimulus looks more likely.
During the Friday currency trading session, the US dollar managed to come back after several days of losses due in part to investors’ concerns over what the Federal Reserve would do to improve economic conditions in the United States. During the Friday session, which saw broad losses, the Federal Reserve Chairman discussed the need for more stimulus in the US.
Most investors believe that the Federal Reserve is still likely to use a system of asset purchases to help boost the falling US economy. The fall in the currencies around the world that came after the Chairman, Mr. Ben Bernanke, spoke, is likely to be a knee jerk reaction. Most investors believe that the stimulus is already priced into the market as it stands. Investors are likely to wait and see what the Fed does before making further movements.
Information out of Australia was positive during the Friday session. The Australian economy offers strong economic reports during the day. That helped to push the Australian dollar higher for the day. During the session, the Australian dollar hit parity with the US dollar. This is the first time it has done so since 1983. The currency managed to move higher to as much as US $1.0003 for the day. However, it did fall back some as the US dollar retraced its broad losses. In particular, the country’s mining sector is seeing a boom, and the country has a robust labor market. In addition, the Australian bank has raised its key interest rate, all of which have helped the currency to move up 20 percent against the US dollar since the middle of 2010.
By The Numbers
During the trading session on Friday, a wide number of currencies moved to highs against the US dollar during volatile intraday trading. This occurred after Bernanke’s comments. However, as the day progressed, the US dollar rebounded. Throughout the day, the euro managed to rise to US $1.4161, the highest level it has been at since January of 2010. The UK pound moved as high as US $1.61 during the day, for the first time since January of 2010.
By the end of trading, the euro had moved from US $1.4077 as of Thursday to US $1.3974. The euro moved from Y 114.74 to Y 113.77. The US dollar moved from Y 81.51 to Y 81.41. The UK pound moved from US $1.6013 to US $1.5983.