Yen and Dollar Improve As Growth Slips

Added: June 29, 2010

Both the yen and the US dollar improved during Tuesday's session. Investors were looking for safety amid fears of growth slip.

After a day when the euro was improving and investors were looking for riskier assets, Tuesday was a day of trading in the euro and moving to safer currencies. Both the United States dollar and the Japanese yen did well during the trading session, improving as investors turn to these safer currencies and away from the euro. Investors moved away from risk as reports showing a lack of growth in the economy worried them. It lead many investors to believe that a global recovery could be falling apart.

Chinese and American Economies

The trading session on Tuesday showed that fear was driving the markets considerably. News out of China indicated that the country's economy was slowing in its growth rather than speeding up. And, news out of the United States also worried investors. The US consumer confidence levels fell during the previous month, all pushing towards a lack of good news for currency investors. As two of the most important economies in the world, investors worried that the slow down could move away from a potential global recovery.

The Conference Board's economic indicator for China was corrected to a rise of only 0.3 percent for the month of April. That was correcting the previously issued rise of 1.7 percent. It also notes that the increase is a sharp decline after the month of March's 1.2 percent improvement.

There was also a sharp drop in the US Consumer Confidence report issued for the month of June. Job outlook and economy recovery sustainability where the most watched indicator's in the report.

By the Numbers

During the trading session, the yen saw the most improvement in currencies across the board. Most of this came from investors unwinding bets on higher yielding assets. The euro managed to fall to its lowest level against the Japanese yen since November of 2001.

Investors also moved away from the New Zealand and Australian dollar during the day. Those dollars fell back in value as investors consider these two economies closely tied to the growth in a global economy, especially the Chinese economy. Both currencies fell by more than two percent against the US dollar.

As of late Tuesday in New York trading, the euro moved from US $1.2276 as of Monday evening to US $1.2196. The US dollar moved from Y 89.41 to Y 88.54. The euro moved from Y 109.78 to Y 107.97. The US dollar moved from CHF 1.0872 to CHF 1.0808. The UK pound moved from US $1.5105 to US $1.5074 for the day. The ICE Dollar Index moved the US dollar from 85.701 to 86.105.

Euro

Also playing heavily on the minds of currency investors on Tuesday was the upcoming move to occur on Thursday when numbers euro zone banks are to repay some EURO 442 billion in 12 month funding. Many of those banks are expected to roll over those payments into short term loans, but investors are still watching to see what occurs.

Document Actions

Hedge Your Euro Positions

Posted by Jeanine O'Reilly at Jul 02, 2010 08:14 AM

The euro is going to go up and down like a yo-yo for a long while. The European debt crisis is still a crisis which threatens economic recovery, but it’s the uncertainty created by enormous U.S. debt that forces traders to run back and forth between risk-taking and risk-aversion. The U.S. fiscal position is become more and more precarious. Investors could decide the U.S. dollar is the riskier currency as a result. There is always some normal currency fluctuation of course. One analyst pointed out that the way to offset these fluctuations is to hedge your bets against a fluctuating euro by buying U.S. dollars each time you open a position. This would offset the exchange rate changes and minimize your risk. Some fear the Euro-zone could break up before the debt crisis is over but I don’t think that’s going to happen.

Report Abuse

Name (Required)

Please enter your name.

E-Mail (Required)

Please enter your e-mail address.

Description (Required)

Please state your reasons why you would like to report this comment as abusive. Our administrator will be notified with your message.

Enter the word below (Required)

China's New Currency Policy

Posted by Abdul Hahn at Jul 29, 2010 08:56 AM

China said it’s going to peg the yuan against a new currency basket. That is going to have an impact on the U.S. dollar and is a big unknown right now. Since China won’t say what currencies will make up the new basket, you can only speculate. But from what the analysts can figure out, it appears that the basket will include more emerging market currencies and will weight the Aussie more. China has said for 2 years now that it had a long term plan to rely less on the U.S. dollar and no one really believed them. But this is the first real move towards accomplishing that goal. The U.S. pressured China to let the yuan rise. The U.S. didn’t even seem to consider that China would agree to do so but would change the currency basket at the same time and lower the weight of the U.S. dollar. It was a brilliant move on the part of China. China definitely out maneuvered the U.S. But the net result is that this is just one more reason for believing the U.S. dollar is going to weaken.