US Dollar Up After Geithner Comments

Added: October 19, 2010

The US dollar improves 1.6 percent. Move comes after US Treasury secretary says there is no devaluation of the currency.

During the trading session on Tuesday, the US dollar improved by the biggest amount in one day since August. This comes after the Chinese government introduced a rate hike that was stemmed by concerns that the Chinese economy, which is the world’s fastest growing, could put a strain on global growth.

US Dollar

Also pushing the US dollar higher during the day was comments from Timothy Geithner who is the US Treasury Secretary. He pledged that Washington would not move to devalue the US dollar. This helped to move the ICE Dollar Index higher from 76.922 in North American trading as of late Monday to 78.041. It was able to move as high as 78.276, which, had it stuck would have been a 1.8 percent advance for the currency since August 11th.

Euro

The euro fell from US $1.3999 as of Monday evening to US $1.3733 for the day against the US dollar. That was a 1.5 percent loss and the biggest loss the euro has seen since September 22nd. The euro did manage to trim some of its losses after ZEW, the Center for European Economic Research released information about October’s investor sentiment.

Yen

For the first day in nearly a week, the US dollar managed to climb higher against the Japanese yen. It moved from Y 81.23 in late trading on Monday to Y 81.51 during the trading session on Tuesday. The US dollar fell to its lowest point in 15 years against the yen last week at Y 81.

China

Also effecting the market during the day was the People’s Bank of China and its unexpected move to lift deposit and lending rates within the country by a quarter of a point. This is the first time since December of 2007 that the central bank has taken steps to tighten up monetary policy in the country.

Growth Currencies

Due to China’s move, those currencies that are tightly linked to economic growth, including the Australian dollar, Canadian dollar and the New Zealand dollar, all fell during the day by 1.6 percent. Canada’s central bank kept rates unchanged during a rate setting meeting on Tuesday. Meeting minutes out of the Reserve Bank of Australia showed that currency investors have less likelihood of seeing a rate hike in the near future either. These currencies all fell against the US dollar.

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U.S. a Beggar

Posted by John Sparks at Oct 27, 2010 12:59 AM

China is not going to let the yuan rise until the Asian countries put pressure on it. China can’t let the U.S. tell it what to do since the U.S. is the debtor. It would be like me taking out a mortgage and then telling the mortgage company how to manage the contract. There are also cultural issues affecting China. It would be embarrassing for China to appear as if it is taking economic marching orders from the U.S. This is exactly the kind of problem analysts predicted when the U.S. borrowed so much from China. What I can’t figure out is why the U.S. can’t seem to understand that this reliance on China for financing weakens the U.S. role in the world. It’s as if the U.S. wants to be the beggar but still act like the employer.

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Stop Toying with Market

Posted by Hugh Davis at Oct 27, 2010 10:10 AM

The U.S. feds need to stop toying with the currency market and make up their minds about QE2. All this dithering is keeping the market nervous because it gives the impression the U.S. Federal Reserve Board doesn’t really know what it’s doing. (I have no faith in Geithner’s abilities by the way). Keeping the market on edge for so long with all this talk of quantitative easing is not necessary. The markets will respond no matter what the decision is but they need to do something whether it’s QE2 or no QE2. The fed language is full of words like maybe, possibly, considering and so on. Whatever happened to words like – took action, buy, and made a decision?