Posted December 28, 2010
Holiday causes US dollar to fall. Light trading in New York caused by holidays, snow.
During the Monday currency trading session, the US dollar faced pressure from the markets. This comes after the trading session was reduced significantly by the thinned out market, due to the holiday and to the increased snow problems throughout New York. Most investors showed little care that China increased its rates over the holiday weekend.
The US dollar index moved the US dollar from 80.487 as of the close of business on Thursday to 80.34 by the end of the session in North American trading on Monday. The US trading market was closed on Friday, leading to the long weekend. A bad snow storm in New York continued to reduce the market movement.
For the year, the US dollar index is up 3.2 percent, but has lost one percent in trading in the month of December.
The euro moved from US $1.3114 as of the end of trading on Thursday to US $1.3148 by the end of trading on Monday. London markets were closed on Friday and will remain closed through Monday and Tuesday of this week in observance of the holidays. For the year, the euro has fallen by eight percent, though it is up one percent this month.
Against the Japanese yen, the US dollar moved from Y 82.91 as of late Thursday to Y 82.81 by the close of business on Monday.
China Rate Increase
One of the factors that could have played a major role in the currency market was the surprise rate increased that occurred in China on Saturday. The country’s financial leaders moved to increase the deposit and lending rates. The move is the second such move this year. This comes after the country employed several other tools to help to cool the credit expansion within the country and to reduce inflation as well.
Many investors had expected the country to make such a move in early 2011. That may be why the markets did not react negatively to the news during the Monday session. Some investors are concerned that China’s move could cool global growth and the global economy, not just the Chinese economy. Nevertheless, investors continued to push forward into the riskier assets like the euro during the trading session.
The reduced amount of trading during the session may have helped to exaggerate moves within the currency. Movements may adjust significantly when all markets open back up on Wednesday.