Safety Then Concern: Up and Down Week

Posted April 05, 2011

The US dollar falls and gains throughout the week. Euro zone still a concern.



The US dollar started the week at 76.242 in the US Dollar Index. Throughout the week, it would gain and lose, based on a variety of factors including the continued concern over the euro zone's financial problems.


On Monday, the US dollar gave up significant against rival currencies especially the euro. This came after comments from European Central Bank President Jean Claude Trichet. He did not say so, but currency investors saw his remarks as an indication that the European Central Bank would be raising its low interest rate sometime in the next month. Higher interest rates encouraged the purchase of the euro and helped to reduce concerns about Portugal, which many investors believe may need a financial bailout soon.  The US Dollar Index moved the currency to 76.169 for the day, though it rose to 76.435 during the day.


The US dollar rose during the Tuesday trading session after comments from an official from the United States Federal Reserve. In those comments, he stated that policy makers may not be able to wait for any type of resolution within the countries in crisis before they began removing the ultra accommodative monetary policy. In addition, the Portugal and Greece credit standings were reduced. The US Dollar Index moved to 76.247 for the day. The US dollar pared some of its gains after a report showing US consumer confidence fell in the month of March was released.


The Wednesday session saw the euro rise against the US dollar. The move comes after more talk about the European Central Bank and the way in which it will likely increase its rates. The ECB official signaled that a series of smaller rate hikes may be evident rather than just a one off rate increase in the coming week. The US dollar, as a result was the US Dollar Index moving to 76.091 by the end of the trading session in North American trading.


The Thursday currency trading session showed the euro gaining some traction against the US dollar. One of the aspects of the day affecting this increase was the presence of higher inflatation in the euro zone than what most experts had expected. This helped, again, to encourage currency traders to buy into the euro with the expectation that the European Central Bank would be even more likely to raise that key lending interest rate based on these inflation numbers. Most investors are not expecting the US Federal Reserve to raise the country's key lending time anytime soon. Due to that lack of increase, the US dollar has fallen against the euro. The euro is up 6.1 percent for the quarter against the US dollar. Against the dollar, the euro stands at US $1.4204 for the day. The US Dollar Index moved the currency to 75.851 during the Thursday currency trading session.


Friday's currency trading session showed the US dollar rising to the highest level in value in recent weeks against the Japanese currency. A report indicated that a better than expected US jobs data report was released indicating positive growth in the country's economy. Japan's economic outlook is quite poor due to the nuclear and earthquake situations playing out there. Against the euro, the US dollar pared most of its gains, though, after a Federal Reserve official was less encouraging than other members. For the day, the US Dollar Index moved the currency to 75.857 for the day. Against the yen, the US dollar is at Y 84.08 for the day.