Euro Falls as Investors Take in Euro Health

Added: September 23, 2010

The euro falls against US dollar and yen. European Union economic concerns weigh in.

Euro

During the currency trading session on Thursday, the euro came off its highs seen throughout the week and feel against both the US dollar and the yen. Investors are concerned, once again, about the European Union’s economic health.

During the day, the euro fell from a higher earlier in the week of US $1.3441 to close to US $1.33. The movement of the euro was due to the economic news that came out of the euro zone. Germany, among other countries in the euro zone, weakened during the month of September. In addition, news out of Portugal was also negative. Within the country’s government, the opposition party refused to provide any help in passing a key law aimed at tightening the budget. Also, the Ireland government provided information that the country’s economy shrank by 1.2 percent in the second quarter, something that was unexpected for investors and for the country’s economic advisors.

Swiss Franc

During the currency trading day, the US dollar did fall against the Swiss franc. The euro zone’s safety currency moved the US dollar to the lowest level it has been at since March of 2008.

UK Pound

Also moving against the US dollar was the UK pound. The UK pound improved by 0.2 percent on the day against the US dollar. This comes as investors ponder the potential that the US Federal Reserve could push another round of asset purchases. This led investors to believe that the Bank of England could also do this to help stimulate the economy and improve the currency market.

Yen

The US dollar also fell against the yen. A meeting scheduled late in the day between the Prime Minister of Japan and the US President was schedule and was expected to provide some insight on the country’s intervention in the currency markets last week. On Thursday, the Asian markets were closed for the day.

By the Numbers

By the end of the trading day on Thursday, the euro moved from US $1.3394 as of Wednesday evening to US $1.2217. The euro moved from Y 113.22 to Y 112.32. The US dollar moved from Y 84.54 to Y 84.34 for the day. The US dollar moved from CHF .9864 to CHF .9856. It fell as low as CHF .9805 during the trading day. The UK pound moved from US $1.5669 to US $1.5683. The ICE Dollar Index moved the US dollar from 79.812 to 80.099.

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Risk

Posted by Mark Harmon at Oct 01, 2010 07:24 AM

Japan has gotten itself into a bind now. It wants to weaken the yen but the other countries are trying to keep their own currencies down so exports aren’t threatened. There’s another factor too. The Forex market has gotten so large that it’s unlikely Japan can impact the market with its move. Switzerland tried currency weakening through market intervention earlier this year and had to give it up when the euro started falling. I see a third problem. Governments intervening in the marketplace are preventing the financial markets from adapting to the post-recession economy. It’s time to end the interventions and let the markets adjust even if it’s too slow for most people.