Euro Rises Against Dollar to Near 3 Month Highs

Posted July 30, 2010

The euro managed to climb to near 12 week highs against the US dollar. Again, the US economic conditions plague the market.



During the trading session on Thursday, the US dollar fell against the euro. The euro rose to US $1.31 against the dollar, which is the highest point it has been at in nearly 12 weeks. Investors are more optimistic about the euro zone data being released and that helped to keep the euro strong throughout the trading day. Since early June, the euro has grown by as much as 10 percent. On June 7th, the euro was at US $1.1876. It has steadily risen since that point. Investors are confident that policy makers in the euro zone are working to improve euro zone sovereign debt problems.

Investors have recently invested significantly in bets against the euro, and with the sagging economic conditions in the US data reports about its economy, investors have had to unwind many of those bets. The currency has simply improved too much so not to do so. Investors are now questioning the US’s economic recovery, which has pushed the euro higher. 

Economic Data

On Thursday, there was a release of weekly jobless claims from the US. That report showed an upward change in those claims. This has caused many investors to wonder if the economic recovery will be as quick as once was thought. 

Further concerns over the US economy hit on Thursday. The country’s high level of debt could hurt the dollar further. Investors want to see the US government provide a plan that will help to keep the country’s debt in line and therefore maintain the AAA credit rating the US currently has. This is the same tone that the European Central Bank chief has had about the US debt, as he believes that the fiscal situation in the US may be worse than that in the euro zone. 

It is unlikely that the US’s credit rating will fall, though, since over the long term, expert say, because the country is likely to have a stronger and long term better economic recovery than European countries will. As the euro zone’s fiscal plans go into play, many investors believe that the euro could fall to as low as US $1.25 in the next three months. Nevertheless, debt in the US will hold back the dollar from improving in the short term.

By the Numbers

During the currency trading session on Thursday, the euro moved from US $1.2988 as of late Wednesday to US $1.3090. The euro did manage to make it as high as US $1.3107. However, it is important to note that the close above US $1.30 is a good sign for the euro’s improvement. The euro moved from Y 113.54 to Y 113.77. The US dollar fell from Y 87.44 to Y 86.96, another sign that investors are turning to safer currencies. The US dollar moved from CHF 1.0569 to CHF 1.0414. The UK pound moved from US $1.5585 to US $1.5617 for the day. The ICE Dollar Index moved the US dollar from 82.132 to 81.599.