Under Pressure Euro Sees Some Rises

Added: May 17, 2010

During the currency trading session on Monday, the euro was able to move up slightly. It pulled up from its lows against the US dollar though it remains clearly under pressure.

Euro

The euro's hold backs for Monday continued from last week. While the euro was able to improve slightly during the currency trading session, the improvements were considerably low. The euro zone sovereign debt concerns continued to hold back the euro from any type of marked improvement for the day.

The euro did manage to increase from its four year lows hit during an overnight trading session. The currency fell to the lowest level since April of 2006 during that overnight trading session. Throughout the day, the currency moved up and down, as if traders were still unsure of where the currency should be at. In addition, the global stock markets also rose and fall throughout the course of the trading session. US stocks were able to pare some of their losses during the afternoon. That helped the euro to improve from its lowest drop.

Many investors threw in the towel during the trading session over night. However, throughout the day, the euro was able to rebound as people realized that there is still an opportunity for Europe to take steps to control the debt concerns. On Monday, the finance ministers of 16 countries that use the euro as the common currency will meet to discuss the lack of confidence investors have.

By the Numbers

At its lowest point in four years, the euro dropped to US $1.2234 overnight but by mid afternoon was at the key US $1.24 point, up or down slightly from this psychological level.

By late Monday afternoon, the euro moved from US $1.2372 as of late Friday during the trading session to US $1.2388. The euro moved from Y 114.33 to Y 114.55 by the afternoon. The US dollar moved from Y 92.35 to Y 92.48. The US dollar was at CHF 1.1318 on late Friday and moved to CHF 1.1311 by Monday afternoon. The UK pound moved from US %1.4537 on Friday to US $1.4482 on Monday.

The ICE Dollar Index moved the US dollar from 86.201 to 86.205.

The euro has dropped 7 percent since May 1st., according to Scotia Bank.

UK Pound

The UK pound's movement on Monday was due to the fears of the new government in place. Investors are concerned that the new officials in place could reveal their fiscal problems that are worse than what was revealed previously. This moved the UK pound to lows it has not seen in 13 months, though it rebounded slightly.

China

Though much of the currency trading has focused on the Euro zone's current debt problems, there is still the Chinese currency problems that need to be addressed. China has returned as a new buyer in Treasurys. This marks the first time it has done so in six months. The move was part of a broad demand in place for US assets. Concerns over China's currency valuation did not play a role in the up and down movements of the currency market on Monday, but still are on the minds of investors.

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Euro’s Fall Making China Less Able to Compete

Posted by Gail Leonard at May 20, 2010 03:13 AM

China was giving some indication in April that it was going to let its currency rise some against the U.S. dollar. That was a major victory for the U.S. The euro crisis has certainly made that much more difficult. If China lets the renminbi grow stronger against the U.S. dollar, then the renminbi will also grow stronger against the euro. Already the Chinese companies that rely on Europe for most of its business are finding they are not as competitive. Until the euro settles down, the U.S. shouldn’t expect China to let its currency rise.

Europe’s financial crisis has the possibility of dragging the global economy back into a recession. I hope that doesn’t happen, but it’s certainly a possibility. But China is obviously worried. Its policymakers have been currency intervening more and not less as the renminbi has risen over 14% against the euro in the last few weeks. China is holding its currency at a peg of 6.827 renminbi against the U.S. dollar. In my opinion, the really scary part of this story is that none of the global financial experts know where the Euro-Zone crisis is heading.

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Undervalued Renminbi Equivalent to Tariff

Posted by John Miller at May 20, 2010 03:13 AM

The Chinese renminbi is undervalued by 20% to 40% according to some estimates. The manipulation of the currency is not a minor intervention but rather a harmful act that is affecting global trade. What is amazing is that this kind of currency intervention amounts to a policy of tariffs. Yet China is the first to holler loud when it believes the U.S. is imposing protectionist tariffs.

This is the formation of the new economic world order. Anyone who thinks differently is not paying attention to the growing Chinese economic power and world influence. China is a member of the International Monetary Fund and is not supposed to be manipulating its currency to benefit itself. But do you see anyone really making headlines with their objections. Other countries, including the U.S. seem to believe they have to delicately dance around the real issues with China. In the meantime China continues to do whatever it wants.

Perhaps the IMF should be the agency to pressure China. That would let the rest of the world avoid a confrontation with this economic powerhouse.