Euro Improves as Investors Ease on Banking Concerns

Posted July 27, 2010

The euro improved to one week highs on Monday against the US dollar. Investors are less concerned about the banking concerns.



During the currency trading session on Monday, the euro managed to improve to one week highs against the US dollar. The euro was able to improve above US $1.30 during the trading day. Most of this movement was due to the lesser concern from investors over European banks, of which most passed the stress tests during the day.

Investors are no longer concerned that the bank stress tests were not stringent enough, it is believed. In addition, investors moved towards the euro as more good economic information came out from the United States and from Europe. Investors turned towards riskier assets due to this improvement. 

Without any new calamities being learned of from the bank stress tests, which data was released on during the Friday trading session, investors were happy to turn to the euro as a higher yielding currency. 

US Dollar

The US dollar fell to the lowest level it has been at against the euro since early May. It fell against other major competitors as well for the day. The euro was rallied by improvements in the US stock market and from economic data that looks promising. The US dollar was down against many of its competitors even though US new home sales data for the month of June showed a higher than expected improvement, rising to over 23 percent. Economists had only predicted improvements at 3.7 percent. Investors are still concerned about how the US economy will perform in the second part of the year, though.

Investors want more data and information out of the United States before they will be less concerned with the country’s economic conditions. Nevertheless, the US dollar often falls back when good economic conditions are present. This is because investors turn to the euro and other riskier assets during these times as a way of increasing their earning potential.

Australian Dollar and New Zealand Dollar

As investors turned to the Australian dollar and the New Zealand dollar during the day’s trading as well. With the positive news out of the United States and Europe giving investors more encouragement about the economy, these commodity based currencies fared well during the day. 

By the Numbers

During the trading day, the euro was up about 0.65 percent by the late afternoon session in New York. By late in the day Monday, the euro moved from US $1.2918 as of late Friday to US $1.2997. The euro moved from Y 112.98 to Y 112.91 for the day. The US dollar moved from Y 87.45 to Y 86.89 for the day. The US dollar moved from CHF 1.0527 to CHF 1.0485. The UK pound moved from US $1.5432 to US $1.5485. The ICE Dollar Index moved the use dollar from 82.475 on Friday to 82.022 by the end of the day Monday. This marked the lowest level it has been at since May, before it managed to improve slightly.