Low Volumes Equate to Flat Dollar

Posted July 07, 2010

The US dollar ended without much change on Monday. The holiday weekend slows the currency markets.


US Dollar

In the United States, many investors took the day off from trading, making for a lower volume day in the markets. The US dollar stayed flat for the day.

Trading flows were light for the day, but the dollar did try to make a rebound from Friday’s lows during the early part of the trading session. It moved up significantly against the euro and other risk sensitive currencies during the early portion of the trading session. Investors had sold off the US dollar significantly during the Friday trading session as disappointing news out of the US worried investors.

The disappointing jobs data released for June was one of the reasons many investors turned against the dollar on Friday. Although it did rebound slightly, the dollar lost most of those gains and ended relatively flat for the day. The market had no real direction during the Monday trading session. Investors stated that no real trends were developing during the day and the lack of liquidity bought the US dollar some time.

Global Recovery Concerns

It is likely that the US dollar and the other major currencies will see some struggling during the trading day on Tuesday. Investors are likely to focus on the slow down in the global recovery. A concern that the economic recovery will slow is worrying many investors. 

Investors also warned that the lack of movement during the Monday trading session was not an indication of any type of improvement in the markets overall. It was more like a “time out” for investors, stated analysts from Barclays Capital. Risk appetites are not improving.

The Euro

The euro moved from its high of US $1.2600 area on Friday. This occurred after the US jobs data was released, which provided less than ideal conditions for investors who are worried about a global slow down in the recovery process. The lowering of the euro’s value signals that investors are not yet comfortable with the euro in total. Investors are still not anxiously accepting of the euro’s risk.

Investors stated that the euro is likely to see more weakness in the coming days and weeks, but the selling of the euro is not as likely to be as aggressive as it has been. Debt concerns in the euro zone continue to worry investors, especially as poor economic data from the US worries investors. Many investors are uninterested in taking on higher risk currencies.

By the Numbers

During the trading session on Monday, the following movements in the major currencies occurred. The euro moved from US $1.2543 as of late Friday to US $1.2541 by the end of the trading day on Monday. The euro moved from Y 109.96 to Y 110.02. The US dollar moved from Y 89.70 to Y 87.75. The US dollar moved from CHF 1.0648 to CHF 1.0642. The UK pound moved from US $1.5185 to US $1.5135. The ICE Dollar Index moved the US dollar from 84.478 to 84.573 against other major currencies.