US Dollar Falls On Growth Concerns

Added: August 31, 2010

The US dollar fell on Tuesday as investors considered growth risks, against the yen. The dollar also improved against the Swiss franc.

During the currency trading session on Tuesday, the US dollar fell against both the yen and the Swiss franc. Investors are still concerned over the slowdown of the US recovery and took to the safer investments.

US Economic Data

Investors are still concerned about the pace of the US economic recovery and as such reacted to the Federal Reserve’s rate setting meeting committee minutes in such a tone. Investors did not react too negatively after the minutes were released, but at the same time, it became clearer to investors that the slow down in the United States seems to be a reality. Investors are anxious to learn how the Federal Reserve plans to offer some type of kick start to the economy, which has held back the dollar during trading. The meeting minutes did not offer anything significantly worrisome, but it did show that the Fed has put a hold on increasing rates due to the shrinking of the massive balance sheet.

It is likely that investors will continue to watch and wait for more economic data to come out of the US before making any significant moves. Specifically, Friday’s nonfarm payroll report is due out, which could give investors an indication of which way the markets are moving.

Euro

The euro also struggled to gain against other currencies. It did manage to improve in small amounts against the UK pound and the US dollar. This came off of information out of Germany indicating that the German labor market has improved somewhat less than what economists had hoped for. However, the same report indicated there was an increasing demand for workers present.

However, during the currency market movements, the euro did fall to an all time low against the Swiss franc. It moved to a low point of CHF 1.2860 during the trading day, marking the first time the currency has fallen below the CHF 1.29 mark during European trading.

Yen

The yen’s movements continue to be on the minds of investors. Some believe that the Bank of Japan’s monetary easing steps are not providing enough of an aggressive move to slow the currencies growth. The Bank of Japan did say on Monday that it would lend another Y 10 trillion in six month funds at a fix rate in order to help the currency to slow its growth.

By The Numbers

By late in the day Tuesday, the euro had moved from US $1.2663 as of Monday to US $1.2673 for the day. The euro moved from Y 107.09 to Y 106.25. The US dollar moved from Y 84.55 on Monday to Y 83.83 by the close of business on Tuesday in New York. The US dollar moved from CHF 1.0261 to CHF 1.0147 on Tuesday. It did fall as low as CHF 1.0136 during the trading day. The UK pound moved from US $1.5459 to US $1.5346 for the day. The ICE Dollar Index moved the US dollar from 83.160 to 83.104.

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Don't Forget China nad Currency Peg

Posted by Vernetta Christian at Sep 02, 2010 07:21 AM

China was supposed to let the yuan rise but apparently they didn’t mean what they said because nothing has happened. Now Obama has refused a request from U.S. manufacturers to raise import duties on many Chinese goods. What a sweetheart deal for China. They get to keep their currency pegged to the dollar and can undercut U.S. manufacturers. This is one reason why it’s never good to let a single country own too much of your debt. With such a weak recovery in the U.S. and China growing strong, the Chinese have a lot of momentum in their corner. They might never let the yuan rise in reality and unless the U.S. is willing to call them currency manipulators, China can pretty much do what it wants to do.

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Signs

Posted by Jim Kelley at Sep 02, 2010 07:21 AM

Watch out because the U.S. jobless claims numbers are coming out Thursday. Hard to say which way they will go since the last predictions have been understated as to the extent of the problem. Bernanke threw plenty of confusion into the mix by implying the Fed will prop up the economy if necessary but wouldn’t say what will convince him to make a move. So here sit investors wondering if anyone out there knows what the heck is going on. If the unemployment numbers are good, I guess the dollar will drop and the stock market surge will upward again. It’s getting to be a very un-funny joke. My guess is that volatile trading will continue until at least the November elections. If the current party remains in power then things could get even more volatile since they want to raise taxes. In fact, even if it loses a lame duck Congress could do a lot of damage by raising taxes and damaging the little bit of recovery that’s happening. Personally, I think both Bernanke and Geithner should be fired. They both contributed to this mess.