Posted September 08, 2010
The US dollar falls against the yen during trading. It gains against the euro.
During the trading session on Tuesday, the US dollar gained against the euro but fell against the yen. The movements in the market stem from growing concerns about the European banking system. That, pared with the worry that the economy is growing too slowly pushed investors towards the perceived safety of the yen, Swiss franc and, for some, the US dollar.
European Central Bank
One of the main concerns for currency investors during the trading session was the bank stress tests conducted by the European Central Bank. The Wall Street Journal reported that the stress tests conducted by the central bank a few months ago underestimated the exposure of some of the larger banks in the euro zone have to sovereign debt. This news article caused a great deal of turmoil in the stock markets as well as in the currency markets.
The article lead investors to doubt the legitimacy of the gains the euro had over the summer session. The newspaper reported that there was a lack of rigor in the tests which could have allowed the euro zone banks to respond more favorably to the tests. As such, investors moved to the less risky currencies during the day.
Investors Move to Safety
As news of the lack of testing strength continued to move into the market place, the US dollar fell to new 15 year lows against the Japanese yen. The euro also fell to its lowest point ever against the Swiss franc when it hit CHF 1.2812.
The Swiss franc has become a safe haven for investors in financially troubling times. It is unlikely that the Swiss central bank will intervene in the movement of the franc unless it sees that the rise in the currency’s value is causing deflation such as by making imports less expensive. The Swiss National Bank has made no movements to enter the currency markets at this point.
By the Numbers
By the end of the trading day on Tuesday, after the Labor Day weekend in the United States, the euro moved from US $1.2896 on Friday to US $1.2689. The euro moved from Y 18.87 to Y 106.33. The US Dollar moved from Y 84.43 to Y 83.80. The UK pound moved from US 4.15470 to US $1.5350 for the day. The ICE Dollar Index moved the US dollar from 82.010 to 82.815.