Posted August 13, 2010
Investors help US dollar to improve. This on the heels of economic news that is less than promising.
During the currency trading session on Wednesday, the US dollar improved significantly against all of its major competitors, except for the Japanese yen. Investors turned to the US dollar because of its perceived lower risk, especially as the information from the Federal Reserve the day before put a cooling on the increase of the euro.
During the trading session on Wednesday, the real concern for investors was the economy. Investors saw numerous reports throughout the world that indicated a global slow down in the recovery process. The Federal Reserve on Tuesday made less than positive comments about the economy in the United States, and did not indicate any reason to increase key lending rates, something investors have been waiting for.
In addition to this, China, France and Japan all released less than ideal manufacturing data during the trading session. Further, the Bank of England downgraded the country's growth outlook as a slow down appears to be in the picture. Growth sensitive assets, in particular, have cut that outlook.
Although the US dollar did improve against most currencies for the day, it fell to drastic lows during the trading session against the yen. During the day's trading, the US dollar feel to below Y 85, before improving, which is a 15 year low in European trading.
During the trading session on Wednesday, the euro fell significantly. It lost about 2.3 percent during the day, and touched the US $1.29 mark, which is the lowest it has been in the last two weeks. The 2.3 percent fall is the largest fall for the euro against the US dollar since December of 2008. In addition to falling against the dollar, the euro also fell significantly against the yen, as investors turned to the yen as a safer option. Against the yen, the euro fell also by a margin of about 2.3 percent.
Canadian Dollar, Australian Dollar and New Zealand Dollar
Also notable for the day was the move in the Canadian dollar, the Australian dollar and the New Zealand dollar. All three currencies feel against the US dollar for the day. These currencies are commonly associated with global growth, improving when economic growth is sparked and improving since they are commodity based economies. Each of the three currencies fell by one percent during the trading day against the US dollar.
The UK pound fell against the US dollar as well during the trading session. This occurred as the Bank of England cut back on its economic growth forecasts and the long term inflation in the quarterly inflation report released during the day. It allowed the currency to fall below US $1.57 for the first time this month.
By The Numbers
During the trading session on Wednesday, the euro moved from US $1.3187 to US $1.2882. The Euro move from Y 112.58 to Y 109.99. The US dollar moved from Y 85.35 to Y 85.37. The US dollar moved from CHF 1.0470 to CHF 1.0576. The UK pound moved from US $1.5886 to US $1.5683. The ICE Dollar Index moved the US dollar from 80.762 to 82.276.