Euro Rises with Help from Australian and Canadian Currencies
On Tuesday, the euro advanced against the dollar. The Canadian dollar and the Australian dollar gained against the American dollar. The increases are due to the central banks stated slightly improved economic outlooks over previous statements.
By Tuesday afternoon, the euro had moved to $1.3614 up from the late money posting of $1.3559. This was according to EBS. On Tuesday afternoon, the dollar was at Y88.86, which is down from Y89.07. The euro was up from Y120.79 to Y121.05. The United Kingdom pound was at $1.4987 up from $1.4983. The dollar moved from CHF1.0793 to CHF1.0750.
The Bank of Canada issued a statement that offered an upbeat look at the country’s economy. The Bank of Canada held true to its promise to keep its conditional commitment of keeping rates at the lowest level possible until the end of the second quarter. The rates are currently set at 0.25 percent. The Bank noted, though, that economic activity in the country was higher than what was projected at the beginning of the year. It also noted that core inflation was slightly firmer than it had expected it would be. This statement leads some investors to see the Bank taking small but significant steps towards strengthening its monetary policy. Eventually, this would encourage the bank to increase the interest rate.
The Reserve Bank of Australia also improved its outlook while also raising its key interest rate overnight Monday. The Australian dollar gained more modestly over the American dollar. This news helps to point to two countries that seem to be moving out of the global economic downturn. The Reserve Bank increased its rate for the fourth time since the financial crisis began, mainly due to its improving economy. After the decision to increase the rate, the Australian dollar rose modestly and gained just about 0.5 percent against the dollar by Tuesday afternoon.
Because of these increases, the euro is seeing a “spilling over” of benefits from those currencies. On Tuesday, the currency ticked just about the $1.36 level. Although this improvement is progress, it is not enough to overcome the unresolved issues the euro is up against with the Greek debt. The common currency is simply under pressure and the debt’s effect may spill into other euro zone countries as well. It is likely that the euro will continue to struggle against sovereign debt for some time. Further, fiscal difficulties in Europe may lead to a slower global recovery. The euro may get some support as Greece is likely to announce new measures aimed at showing the euro zone that it can get its fiscal policies in order.
The ICE Dollar Index showed the American dollar at 80.514 down from 80.728. The ICE Dollar Index is a tool used to track the American dollar against trade weighted basket of currencies. The US dollar fell against the Canadian dollar in Tuesday afternoon trading. The drop of nearly 0.9 percent moved the dollar from C$1.0423 on late Monday to C$1.0325. The US dollar did drop to C$1.0310 during that time, which put it at its lowest level since January 20. This low drop occurred just after the Bank of Canadian’s statement.