Posted May 20, 2010
The euro rebounds off the four year lows that it struck during Tuesday’s day of trading. However, the European common currency is not out of the woods yet.
The euro is at the center of the up and down, jittery markets that are occurring throughout the world. During the currency trading sessions of Wednesday, sentiment was improved somewhat over Tuesday’s incredibly drop. The euro moved forward considerably during the day. This movement as in part due to the European authorities who said they would respond to the currency’s rapid decline when and if needed.
The European Central Bank, most specifically, is able to take significant steps that could help stop the euro’s fall. This is the theory that many investors in the market were relying on during the trading session during the day. The belief is that the fall was too fast. Investors believed that if the European Central Bank believed it necessary, it could step in and help boost the currency. That thought that this is possible, or probable according to some investors, helped to boost the euro by more than 1.5 percent during the trading day against the US dollar.
The European Central Bank had no comment about this move, nor did the Federal Reserve. The thought of a threat like this being possible caused many investors betting against the euro to take a step back. Even though the euro was able to rebound slightly, the fact is, the slower growth in the euro zone and the debt complications will continue to hold it back from a rebound.
By The Numbers
During the currency trading day on Wednesday, the euro moved up from US $1.2209 as of late Tuesday to US $1.2391 by the end of trading in New York Wednesday. The euro moved from Y 112.75 to Y 113.41. The US dollar moved from Y 92.34 to Y 91.54 during the trading. The US dollar moved from CHF 1.1470 to CHF 1.1517. The euro moved from CHF 1.4005 to CHF 1.4309. The UK pound also moved significantly from US $1.4328 to US $1.4415. The ICE Dollar Index moved the US dollar from 87.089 to 86.276.
The Swiss franc was hurt during the day’s trading against the euro. This was likely due to speculation on the part of investors that the Swiss National Bank intervened in the currency markets at some point to temper the strength of the franc. As is the normal, the Swiss bank did not comment on any changes.
Australian, Canadian and New Zealand Dollars
The dollars from Australian, Canada and New Zealand did not fare as well against the euro or the US dollar in trading. These commodity backed currencies fell 2 percent against the US dollar during trading on Tuesday. Even the rally Wednesday failed to improve the dollar value significantly enough. The biggest hold back for these currencies is the difficulties in the euro zone, as well as the slow growth there. China’s promise to slow its economic growth and the falling commodity prices in Europe are hurting each of these currencies.