Euro Falls As Investors Get Worried

Posted July 21, 2010

The euro fell during the currency session Tuesday. Investors are worrying about stress tests.


The Euro

During the Tuesday currency trading session, the euro fell from its ten week high against the US dollar. The fall happened because investors are now worried about the outcome of the European bank stress tests, which are due to be released this week. 

The euro moved towards the US $1.30 mark during the day, but investors believe that the currency is unlikely to hold on to these gains as the stress test results draw nearer. The euro hit its four year low point in early June, at that time hitting under US $1.19. Most investors believe the euro will be unable to trade much higher than what it has recently increased to against the dollar, even with positive results from the test results.

Investors believe that the euro will continue a week of bank and forth, and likely drop its value over the course of the rest of the week, as investors wait for the release of information on the stress tests. It is also likely to worry about the upcoming comments from Fed Reserve Chairman Ben Bernanke on Wednesday.


Also noteworthy during the trading day on Tuesday was the Bank of Canada which raised its key lending interest rate on Tuesday. The country has already increased the rate recently, making this the second rate hike in the last two months. This move has helped to show investors that the economic growth in Canada is significant. Countries with large industrialization, such as Canada, are doing far better in terms of economic growth than others. The US, for example, has had numerous disappointing figures in the last few weeks which has led many investors to believe that the country's growth is slowly. European countries also are struggling as they continue to balance the euro zone's debt loads on shaky ground.

The Canadian dollar managed to improve by more than one percent during the trading session against the US dollar. This was even though the country's central bank lowered its economic growth forecasts for the rest of the year.


Also moving higher against the US dollar was the Australian dollar. It managed to gain nearly 1.8 percent on the day against the US dollar. This happened after the Reserve Bank of Australia announced that it was also increasing the target interest rate for the country. This, too, poises well for the theory that industrialized countries like Canada and Australia are faring better in terms of economic growth over the US and euro zone.

By The Numbers

By the end of the currency trading session on Tuesday, the euro moved from US $1.2942 as of late Monday afternoon to US $1.2893. The euro moved from Y 112.41 to Y 112.73. The US dollar moved from Y 86.86 to Y 87.44 for the day. The US dollar moved from CHF 1.0552 to CHF 1.0524. The UK pound moved from US $1.5235 to US $1.5282 for the day. The ICE Dollar Index moved the US dollar from 82.591 to 82.772.