US Dollar Falls Significantly: Investors Not On China Rate

Posted October 23, 2010

The US dollar feel against euro and other currencies. Investors did not focus on worries that China is slowing economy.


During the Wednesday currency trading session, the US dollar fell significantly, losing most of the gains it accumulated the day before. Investors did not seem to be worried about the efforts of the Chinese government to slow down the country‚Äôs economy. 

Chinese Economy

Most investors had the view that the Chinese economy was strong enough to handle the small increase in the key lending interest rate China put into place during the trading session. This helped to push investors towards the higher yielding currencies including the Australian dollar and the euro. The Australian dollar, closely linked to economic growth, especially Chinese economic growth.

The indication of Chinese growth in the marketplace seemed to push the appetite for risk in investors, pushing them away from the US dollar, with its perceived strength. Data to be released on Thursday could provide additional information on the Chinese government, and is expected to be good. 

US Dollar

During the trading day, the US dollar was pushed lower as the German Chancellor, Angela Merkel noted that the country would be moving away from stimulus measures for the country. This added more speculation on what the Federal Reserve may be moving towards in its likely bond purchase.  Many investors believe that they can expect a stronger euro that is based on the seemingly present confidence in the European recovery. Investors are also pushing towards the euro because of the unstable US economy which likely needs more stimulus to continue to growth. That weakened the dollar while pushing the euro higher for the day.

Some reports were circulating in the market that the Federal Reserve will take the quantitative easing method of stimulus and that the decision had been made to do so, though this was not confirmed.

By the Numbers

During the trading day, the US dollar fell to new 15 year lows against the yen, to Y 80.84, though it managed to improve slightly. The euro moved from US $1.3730 to US $1.3949 for the day. The euro moved from Y 112.01 to Y 113.25 for the day. The US dollar moved from Y 81.58 to Y 81.16. The UK pound moved from US $1.5697 to US $1.5840. The US dollar was at CHF 0.9709 at the end of Tuesday session and moved to CHF 0.9627 by the end of the day Wednesday. The ICE Dollar Index moved the US dollar from 78.218 to 77.212.