Dollar Loses Early, Pares Later

Posted November 19, 2010

US dollar able to pare some losses. European debt, IMF concerns move market.


US Dollar

During the currency trading session on Wednesday, the US dollar was able to improve somewhat after it suffered significant losses early in the day against the euro as well as its other major currency competitors. During the afternoon session, two reports came out of the US that underscored the reasoning for the recent moves by the Federal Reserve. Recently, the Fed has eased monetary policy and began buying billions of dollars in Treasury bonds.

The US Dollar Index showed the US dollar moved from 79.215 on Tuesday in North American trading to 79.099 by the end of trading on Wednesday. So far this week, the US dollar has gained 1.3 percent against its competitors. This stems from the concern over European debt and the US data.

In terms of US data, two reports issued on Wednesday issued some concern for investors. Both the housing starts data and the retail level inflation numbers were released. Both showed negative data, which helped to show why the Fed has been pushing money into the US economy and, as a result, weakening the US dollar. One of the biggest concerns for the Fed, it seems, is that inflation is stabilizing at too low of a level. This concerns the Fed and as such it is likely that the US central bank will keep looking for ways to pump money into the financial system. 


The euro struggled to move ahead during the day. Investors are still quite concerned about the need for Ireland to reach out for a bailout for its banking system. In addition, investors are still concerned about which, if any, other European country may be next to struggle financially.

The euro moved from US $1.3493 in North American trading on Tuesday to US $1.3521 by the end of trading on Tuesday. Many investors say that the euro is too vulnerable to further selling pressures. This is particular evident in the concerns about Ireland’s financial crisis. 


The Japanese yen also moved against the US dollar. On Tuesday, it stood at Y 83.31 at the end of trading and moved to Y 83.30 by the end of the Wednesday session.

UK Pound

The UK pound was able to improve against the US dollar during the Wednesday session. It moved from US $1.5882 as of Tuesday evening to US $1.5801 by the end of Wednesday’s session.