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Euro Rebounds As Greek Deal In The Works

Added: March 26, 2010
The Euro rebounded on Friday during trading as the Greek debt concerns subside. The dollar falls as a result.

In the currency markets on Friday, a rocky road was the route taken. Only the Mexico peso gained in value against the US dollar. In fact, the peso was the only currency to gain against the dollar the entire week. The Mexican currency increase was due directly to the strengthening of the United States economy. When the economy in the U.S. is strong, the demand for Latin American exports increases, thereby fueling those economies.

 

By the numbers, the peso moved up 0.7 percent against the US dollar from 12.5854 as of March 19th to 12.4962. Over the year, the peso is up 4.8 percent against the dollar. This is the best performance of any currency in the 16 major currencies.

 

Euro

 

 

During trading on Friday, the euro took back some of the US dollar's gains. Currency traders breathed a sigh of relief as the European Union announced a package that would help to bail out Greece from its debt problems. On trading on Friday, the euro moved from 1.3277 to 1.3410 against the US dollar. The US dollar fell from ten-month highs against the euro in the previous week.

 

The news about Greece seemed to provide a stabilizing force for the 16-country euro zone. A deal was struck in which the 16 countries of the euro zone will provide low interest loans to Greece in combination with the aid from the International Monetary Fund. However, not everyone was confident in the deal, which may have held back the euro from rebounding farther in the day's trading. Not everyone is happen that the IMF needed to be used to bail out the country's debt, leading to beliefs that the euro zone was less than capable of handling its debt concerns. Nevertheless, sentiment was that some type of deal was better than no deal at all.

 

By The Numbers

 

 

In other trading news, the dollar fell against the yen. It moved from 92.67 on Thursday to 92.52 by the end of the day Friday. The US dollar also moved lower against the Swiss franc. It moved from 1.0733 to 1.0652. The British pound, however, moved from 1.4814 against the US dollar to 1.3410.

 

The Australian dollar did well in trading. As investors turned back to the euro now that the debt issue seems in hand, risk-sensitive currencies like that of the Australian dollar were more appealing to investors. The Australian dollar moved from 90.93 at the close on Thursday to 91.1 US cents by the end of trading on Friday.

 

China Currency

 

 

Also important this week is the Obama administration's calls on China to adjust its currency value gap. US Treasury Secretary Timothy F Geithner made comments on Wednesday saying that the administration was unable to force China to adjust their currency. However, he did say that he believes that the country will do so. Currency traders and the US government are concerned that the Chinese government is keeping its currency value low to ensure its goods remain inexpensive on the markets.

 

Document Actions

IMF Loan to Greece

Avatar Posted by Jeanine O'Reilly at Mar 29, 2010 12:31 AM
It is really not surprising that the European Union ended up relenting on giving loans to Greece. Letting Greece default on its debt was going to hurt the Union more than it would hurt Greece. The concern about taking money from the International Monetary Fund was over-rated too in my opinion. Once the extent of Greece's deficit was understood, there could not be too much worse damage to the Euro-zone image as a stable economic entity. The Euro-Zone was damaged the most when it became clear that Greece was a member under false pretenses. I think it is horrifying that such a large problem could be hidden from a group of finance ministers so easily. All the wheeling and dealing that was going on and no-one knew? That's why Greece's problems have been factored into the euruo for months now. My prediction is the euro will continue to rebound because Ireland, Spain, Portugal, and now Greece are actually implementing some austerity programs. What's the U.S. doing? Spending, spending and spending some more with no plan for deficit reduction in sight. This does not bode well for the U.S. dollar.

Piecemeal Approaches Never Work

Avatar Posted by John Miller at Mar 31, 2010 08:12 PM
In fact, Ireland has proposed broad measures that will revamp the financial sector. The U.S. proposal to revamp financial regulation is weak to say the least. In fact, critics claim it won’t change anything and banks will go back to their risky behavior. Ireland is virtually nationalizing its banks. That is not something the U.S. wants to do but the point is that Ireland is making some tough decisions intended to prevent a repeat of bank risky behavior while also providing a clear path for future recovery and stability. In the U.S. it’s business as usual and that does not bode well for global markets. Ireland established a National Asset Management Agency and the website says that the government is taking over 77.1 billion euros in loans. In all fairness, the U.S. is taking over student loans and mortgage loans also but here’s the difference. In theory, the U.S. government is not supposed to be so involved in direct lending if it follows its capitalistic model. In addition, the U.S. is approaching the changes piecemeal rather than addressing the overall economic and monetary policy weaknesses that caused the recession in the first place.

Watch Ireland and Witness Euro Strength

Avatar Posted by Gail Leonard at Mar 31, 2010 08:12 PM
The euro has a lot bigger problem than Greece’s debt. Ireland also is faced with a weak economy that is going nowhere. The Irish government has to up its stimulus spending at a time economic recovery should be underway. Greece’s problems have been overshadowing other countries with terrible problems. Ireland had to inject billions of euros into the economy which dragged the euro down again. German’s growth forecasts were downgraded. Spain has over 20% unemployment. All of this is affecting the euro but I still believe the European Union and the euro will endure. There is some concern that the weak euro reflects a weak union but I don’t see it that way at all. The U.S. economy may recover faster, but what kind of recovery will it be? The EU recovery may well be setting the Union up for a longer and more sustainable economy.

More To China

Avatar Posted by Jum Kelley at Mar 31, 2010 08:12 PM
To understand China’s stubborn reluctance to end yuan manipulation, it’s important to grasp that the Chinese have more at stake than many other countries. The global countries quickly discarded China’s claim that a 4% unemployment rate in China is a much bigger problem than a 9% unemployment rate in the U.S. because of China’s huge population. Yet that is a true statement. China wants to protect export jobs but also wants to keep social stability. The social stability concern is really not included in the U.S. or many European country policies because it’s not an issue. The country that is closest to having China’s concerns is India and that’s because there are so many similarities in terms of size of the population and the possibility of disrupting social unrest. It just shows once again the importance of currency markets.

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