US Dollar Falls on China Rate Hike

Posted February 09, 2011

US Dollar down on Chinese information. Euro economy a factor.


US Dollar

During the Tuesday currency trading session, the US dollar fell against the euro. The dollar did manage to improve against the Japanese yen late in the trading day. This late in the day increase comes from the improvement in US Treasury yields that occurred after a bond auction did poorly. All of these factors played a role in the view of traders that the US dollar was more valuable.

However, earlier in the session, the US dollar was under even more pressure as information out of China indicated that the key interest rate for the country's lending system was increased for the third time since the mount of October. Investors had hoped and expected that the Chinese government would begin tightening up monetary policy. The county is expected to continue to grow sufficiently in the coming year. The problem is, many investors believe the Chinese government needs to reel in the roaring economy present in China.

The US dollar moved from 77.994 at the end of the trading session in North America on Friday to 77.962 at the end of the trading session on Tuesday evening. 

The Euro

The euro moved from US $1.3597 at the end of the Monday trading session in North American trading to US $1.3634 by the end of the Tuesday session.


The US dollar moved from Y 82.32 at the end of the North American trading session on Monday to Y 81.38 at the end of the trading session on Tuesday. The US dollar did spend most of the trading day in negative territory against the yen as well, but moved up in late day trading.  The Japanese yen is considered a very sensitive currency in terms of changes in the US bond yields. This is because of the country's significant holdings of the United States debt.

Australian Dollar

Also notable during the trading session on Tuesday was the movement of the Australian dollar. The currency took most of the weakness in the market place after the Chinese rate hike and initially fell. The country relies on the Chinese economy for many of its exports. However, the currency did make a comeback after the news was better understood. For the day, the Australian dollar moved as low as US 1.0113 during the day. It moved up during the session to US $1.0155.