Euro Loses Some Higher Gains

Added: April 12, 2010

Euro loses some ground. US dollar the safer option.

Euro

In Monday trading, the euro was able to gain, but it fell from its highest levels. The rally from last week’s trading was fueled mainly by the good news of the Greek’s bailout plan. That seemed to have been less beneficial in Monday’s trading.

The euro reached $1.37 in overnight trading, an increase of 0.02 but then gave back half of that amount as trading continued throughout the day. While the aid of the Greek’s debt is helpful, it does not provide any long term resolution of the underlying problem. That problem with the euro zone’s debt has held back the currency over the last several months.

Most economists do not believe that the euro will manage to move much higher in the near future. The euro zone’s overall inability to maintain its financial health continues to plague the euro’s ability to improve.

By The Numbers

The euro moved from $1.3495 in late Friday trading to $1.325 by the end of the day on Monday. The US dollar moved from Y 93.20 to Y 93.26. The euro stood at Y 126.67 to Monday’s level of Y 125.64. The UK pound moved to $1.5380 from $1.5374 as of Friday night’s trading. The US dollar also moved from CHF 1.0666 to CHF 1.0595 by the end of trading on Monday.

Australian and New Zealand Dollars

Greek debt is not a common concern against the Australian dollar and the New Zealand dollar. Both of these currencies, which are commodity based, fell against the US dollar in Monday trading. The main reason for this fall was information out of China. The country reported a slow down in the number of yuan loans. This indicates that broad money supply growth is slowing down. It is likely that the Chinese government will begin to slow down its fast improving economy in the near future. The country also reported that March was the first month in which the country had a trade deficit. That marks the first time this has happened since 2004.

The Australian and New Zealand dollars are closely tied to the growth of these economies and any slow down indicates a likely slowdown in those countries as well. These two currencies fell against the United States dollar counterpart by as much as 0.4 percent. A weak housing data report came out of both countries as well, further putting the pressure on these currencies to perform.

Dollar

The US dollar’s gains on the day were mainly due to the falling of the euro’s appeal. It is likely this will continue a back and forth dance between the two currencies until there is more confidence in the euro itself and the euro zone. The US dollar is seen as a safer option for investors as they consider their options in currencies. News of the US economy continues to strengthen the global outlook of a recession being over, but the US government failed to make that statement on Monday, saying that before it could declare a recession being a thing of the past, it needed further data.

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Global Recovery Remains Weak

Posted by Jim Kelley at Apr 26, 2010 01:04 AM

The global recovery still has a long way to go despite talk by government policymakers about how much better economic conditions are. Consumers are having trouble seeing a recovery and now it appears that the United Kingdom could easily slip back into a recession. Housing markets, consumer spending and bank credit are still not operating normally. In the U.S. the economists are wondering what is going to happen when the U.S. stimulus programs end. Rebate programs and federal dollars that plugged state budgets are disappearing and there is a growing concern a number of cities could go bankrupt unless the federal government comes up with more money.

The volatility in the currency market is still not a thing of the past and won’t be until the economic recovery is solid. Though things are better than they were a year ago, there are some unknowns coming up. For example, the coming election in England could change the course of economic policy. The U.S. doesn’t have an election until November but those up for re-election are already in campaign mode. Both the U.K. and the U.S. are drowning in debt and that is going to prevent a full recovery for years. Right now the U.S. dollar continues to strengthen when investors get worried about risk, but they are also chomping at the bit to make profits. All of this just proves how many unknowns still exist and that predictions of a weak dollar should not be discarded just yet. Personally, I believe that the U.S. and the U.K. have continuing severe economic problems and it is only their ability to create money that provides protection.