Posted June 25, 2010
Due to the Federal Reserve statement on Wednesday, the Thursday trading session saw the dollar weaken against the euro and yen. It did gain against growth linked currencies.
Investors and Fed
The currency trading investors were soured on the US dollar as the Federal Reserve's statement made on Wednesday seemed to signal that interest rates would remain at a very low level for the foreseeable future. Investors turned to riskier currencies in the hopes of finding a potentially larger profit margin.
The US dollar fell during the Thursday currency trading session against the euro and the yen. However, it did perform better against those currencies that are growth linked currencies. The Fed's statement seemed to offer a subdued economic outlook than many investors were looking for. Previously, the US dollar was supported by investors as expectations were that the US recovery would be faster than the recovery of other countries, especially those in Europe as well as Japan. Investors now believe that may not be true.
Australian, New Zealand and Canadian Dollars
In comparison to the euro, which is tied directly to risk in the current trading sector, the Australian dollar, New Zealand dollar and the Canadian dollar all are tied to economic growth. The news from the Federal Reserve in the United States led investors to move away from these currencies during the Thursday trading session as they worried about the potential for economic growth. However, US durable goods and initial jobs claims that were released on Thursday did point to improved data and these reports did offer better than expected data. Nevertheless, investors are still focused on risk aversion.
The Australian dollar moved from US $0.8731 at the end of Wednesday's trading session to US $0.8690. The currency fell overnight. It did manage a short lived rally initially after the ruling Labor Party offered a new prime minister for the country. Julia Gillard will become the country's first female prime minister.
By the Numbers
As of late Thursday, in New York, the euro moved from US $1.2311 as of late Wednesday evening to US $1.2328. During the trading session, the euro did manage to hit US $1.2388, which was a high point for the recent euro value. It lost some of that ground during the afternoon session. The euro moved from Y 110.60 to Y 110.28. The US dollar moved from Y 89.88 to Y 89.49. The US dollar moved from CHF 1.1051 to CHF 1.1024. The UK pound moved from US $1.4951 to US $1.4924. The ICE Dollar Index moved the US dollar from 85.807 to 85.760.
The UK pound seemed to do well at the start of the trading session. It was able to reach US $1.5010 during the trading session. That number has not been seen since May 12, 2010. However, the pound was unable to hold on to these highs. It did see some benefit in the early trading from a statement form the UK government that it was tightening up its budget. This helped would help to protect the country's AAA credit rating, stated Fitch Ratings and Moody's Investors Services.