Posted May 13, 2010
During currency trading on Wednesday, investors looked to the longer term effects of the euro zone and the financial difficulties. Economic factors weigh heavily on euro.
Euro Zone and UK Debt Problems
During Wednesday’s trading, the UK pound and the euro fell. Investors turned their focus to the longer term fiscal concerns of the euro zone. This happened even though a new coalition government took hold in the UK and made an announcement that it would be tightening up its spending in order to fight off a sagging economy in the UK.
According to some investors, it is important for the UK and other euro zone countries to shore up their spending in an effort to allow their economies to do well. The stressed euro zone and the UK in general will face stagnating economies if they do not make key changes. However, other economies, including large ones such as the United States and those that are commodity based such as Canada and Australia are likely to continue towards improvement and recovery.
By the Numbers
A look at the currency numbers as of late Wednesday shows the concerns of investors. The euro had fallen from US $1.2700 as of late Tuesday during trading to US $1.2628 by the late afternoon. The euro moved from Y 117.88 to Y 117.68 during trading as well. The US dollar moved from Y 92.81 to Y 93.19 during trading. The US dollar moved from CHF 1.1089 to CHF 1.1105. The UK pound moved from US $1.4961 to US $1.4847.
The ICE Dollar Index moved from 84.000 to 84.831. This is an index that monitors changes in the US dollar against a trade weighted basket of other major currencies.
The Canadian dollar moved from C $1.0164 at the start of trading from C $1.0187 as of late Tuesday to C $1.019 by the end of the trading session on Wednesday.
Also important during currency trading on Wednesday was the movement of the Canadian dollar. The Canadian dollar fell slightly back during trading on Wednesday, even though it did rally during the session. It lost its gains in the volatility of the market, especially due to the crude oil futures retreating.
The euro and the Swiss franc are in a war. The Swiss franc continues to keep currency traders on edge and is likely to affect the Thursday trading market significantly. The Swiss franc is at a threshold, threatening to break a fresh record high against the euro.
There is no indication that the Swiss National Bank will intervene and push the currency back down, however the bank has said in recent days that it will counter any type of excessive strength that the currency takes hold of. However, it is important to keep in mind that Thursday is a public holiday in Switzerland, which means trading will not be readily available.
Investors are concerned that if the Swiss franc continues its climb against the euro, this will open the dollar for more difficulties and a horrible decline for the euro against the US dollar during future trading.