Euro Improves As ECB Lending Program Sees Less Demand

Posted July 05, 2010

During the currency trading session on Wednesday, the euro improved against the US dollar. This was due to the lower than expected demand for lending programs.


The Euro

During the trading session on Wednesday, the euro improved significantly over the US dollar for the day. This was due in main part by the reduced interest and demand for the European Central Bank’s lending program. This helped many investors to believe that there is not as many risks in the region’s banking sector as is once believed. This low demand for short term loans from the European Central Bank helped to keep the euro up even as Moody’s Investors Services announced that it was reviewing the AAA rating Spain.

The ECB allotted some EURO 131.933 billion in the form of short, three month funds. This would allow the euro zone banks to borrow as much as was needed with a low, one percent interest rate for three months. With the number of one year loans that were due to be repaid on Thursday, it was expected that more nations would need to secure this low interest financing option. The demand had been as high as EURO 250 billion at one point.


Moody’s Credit Ratings announced on Wednesday that it would be reviewing Spain’s AAA credit rating. This did help keep investors more cautious in their investing during the day. The country’s debt problems could cause the credit rating agency to reduce its credit rating. The senior analyst for Moody’s stated that “Spain’s growth prospects are weaker than those of other AAA Rated Sovereigns.” This worried many investors already fearful of the debt problems in the euro zone.
The country’s accelerated fiscal consolidation and the costs of borrowing that continue to rise are holding the country back. It is likely that the country’s government, business and consumers will face a depression of growth for several years, some experts believe.

Dollar Movements

Across the world, the dollar played various movements. In the United States, disappointing news out of the US private sector jobs report held down some of the growth in the euro, as well as in other countries where global growth is key to economic improvements. During the trading session on Wednesday, the Canadian dollar, New Zealand dollar and the Australian dollar all held back.
One of the pieces of data that hurt these dollar growths came from the US payroll giant ADP, which reported that 13,000 new jobs in the private sectors were created in the month of June in the United States. However, this is far from the 60,000 that economists were hoping for.

By The Numbers

By the end of the trading day in New York, the euro had moved from US $1.2196 as of late Tuesday to US $1.2238. The euro moved from Y 107.97 to Y 108.21. The US dollar moved from Y 88.54 on Tuesday to Y 88.43. The US dollar moved from CHF 1.0808 to CHF 1.0772. The UK Pound moved from US $1.5074 to US 1.4957. The ICE Dollar Index moved the US dollar from 86.105 to 86.031.