Posted October 30, 2010
The US dollar is down. Anticipation of Fed action pressures investors.
During the currency trading session on Thursday, the US dollar fell against several major currencies. Investors are particularly concerned about what the Federal Reserve will do at the upcoming meeting next week. Most believe the Fed will announce plans to purchase large amounts of government bonds. If this occurs, experts say it could further weaken the US dollar.
As a result the ICE Dollar Index moved down from 78.138 as of late Wednesday night in New York trading to 77.255, which is about a 1.1 percent drop. The euro moved from US $1.3762 to US $1.3939 during the day while the UK pound moved from US $1.5758 to US $1.5944.
The US dollar also fell during the trading day after the Labor Department announced unemployment numbers. First time filings for unemployment benefits had fallen during the previous week to 434,000, which is down more than 21,000 from where analysts thought the numbers would be.
Against the yen, the dollar was down from Y 81.73 to Y 81.01. The US dollar was up on Wednesday. The fall in the US dollar was due to the Bank of Japan deciding not to change its interest rate policy during a meeting on Thursday. However, the Bank of Japan did change its next meeting to follow the upcoming Federal Reserve meeting to be held next week. The US dollar has dropped 5.5 percent since September 20th, the day before the last Federal Reserve meeting.
The euro’s movements were due in part to information out of Germany. Its gains were extended on the day due to Germany’s announcement that the number of people in the country who are unemployed is now under three million, a significant and unexpected drop. The euro has managed to gain 6.5 percent since the day prior to the last Federal Reserve meeting.
The currency markets are focused in on the movements of the US Federal Reserve. Even with the better than expected labor data out of the country today, it is unlikely that this will be enough to change the sentiment of investors. Investors are looking to learn how much stimulus and the type of stimulus used because of its likely weakening effect on the US dollar. Most investors believe that the central banks will be keyed in on the changes the Fed makes to help strengthen the slacking US economy.