Posted May 11, 2010
Across the globe, currency markets sung the tune of risk when it came to investing on the new trade week. With more confidence in the euro zone rescue plan, more investors turned to these more risky investments.
During trading on Monday, those currencies that are growth sensitive did well, rising sharply for the day. The yen, on the other hand, was hit hard as investors turned towards risk based currencies for the day. All of this is fueled by the massive rescue plan that seems to be in place for the euro zone countries.
The euro stayed in the middle ground throughout trading on Monday. By the end of trading, it only moved minimally against the US dollar but did make big gains against the yen. Still, the euro did fall back from Latin American countries, Asian countries and other commodity based currencies throughout the world. Stocks performed well for the day, which all occurred because of the announcement of a US $1 trillion rescue plan in the works for the euro zone debts. The euro gave up some of its gains for the day, but set the day's high at US $1.3095, mostly as the European stock markets improved. This is a marked improvement from the 14 month lows seen last week. However, the euro only ended up by 0.2 percent for the day. It also is still down 10.5 percent since January 2010.
However, investors are still looking for more information on how the new rescue plan for the euro zone will be financed. It is specifically concerned with the role that government bond buying by the European Central Bank will work. Interestingly, most of the concern by currency traders on Monday was fueled by this new plan which focuses not only on the Greek debt plans, but on all of the euro zone debt problems as a whole.
A good example of the risk traders were willing to take on was present in the Canadian dollar. It ended up sharply on Monday. The US $1 trillion bailout package for the euro zone helped to give investors confidence in moving away from the US dollar and into more risky currencies such as the Canadian dollar. The jobless data that was released on Friday also helped the country's dollar to see an improvement.
By The Numbers
The US dollar moved from C $1.0225 at 8am on Monday from C $1.0427 on Friday late in the trading session. It ended the day on Monday at C $1.0257.
By late afternoon trading on Monday, the euro moved from US $1.2732 on late Friday to US $1.2775. The euro moved from Y 116.71 to Y 119.00. The US dollar moved from Y 91.70 to Y 93.15 on the day. The UK pound moved from US $1.4800 to US $1.4869. The dollar moved from CHF 1.1092 to CHF 1.1099 on the day as well.
The ICE Index which is a basket of currencies the US dollar is trade weighted against moved from 84.494 on Friday to 84.268 by the end of trading on Monday.