Posted November 03, 2010
Monetary policy on the minds of investors. US dollar falls against euro and others.
During the currency trading session on Tuesday, the currency traders pushed the US dollar lower against most of its major rivals. As such, the euro rose significantly on the day. Most investors are concerned about the upcoming Federal Reserve meeting set to occur on Wednesday. Most investors believe that the Fed will ease monetary policy further, which could lead to a drop in the value of the US dollar.
While the election in the United States was also a factor during the trading day, most investors were focused on the movements of the Fed, which is meeting for its policy setting meeting tomorrow, on Wednesday. The election played a role because many believe that the movements in the election will affect who is in control of Congress, and thus could influence monetary policy and stimulus going forward. A major factor in the US election was government spending.
Due to this, the US Dollar Index showed that the US dollar moved from 77.263 in late North American trading on Monday to 76.719 by the end of trading in North America on Tuesday.
During the trading day, the euro also was affected by more concern about European sovereign debt. Some investors fear that concerns about this debt will begin to surface again after the Fed announces its plans to stimulate the US economy. The euro moved from US $1.3888 as of late day trading in New York on Monday to US $1.4036 by the end of trading on Tuesday.
The Japanese yen also moved during the day against the dollar. The US dollar did pare down some of its earlier gains in the day. However, the US dollar remained higher for the day than it was. The Bank of Japan will also hold a policy setting meeting this week, to occur on Thursday and Friday of this week. The US dollar moved from Y 80.48 as of late in the day on Monday to Y 80.70 by the end of the day on Tuesday.
Also notable during the trading day was the movement of the Australian dollar. It moved more than one percent higher during the day, which is the strongest level that the currency has been at in 27 years. This came after the Australian central bank lifted its key lending rate to 4.75. The Australian dollar moved to US 99.85 cents, up 1.4 percent for the day.