US Dollar Gains as Investors Turn to Caution

Posted June 23, 2010

The US dollar was on the rise on Tuesday. Europe's financial sector continues to worry investors.


During the trading session on Tuesday, the euro pulled back from the optimism found during the Monday session over the Chinese decision on its currency appreciation. Further, the euro fell as more investors headed to higher ground to avoid the financial sector in Europe's seeming downfall.

UK Pound

An interesting occurrence in the Tuesday trading session was the improvement of the UK pound. It managed to move up against the US dollar after Fitch Ratings placed some improvement on the UK's government austerity budget. The budget was released early on Tuesday and the credit monitoring agency seemed to improve of it.

Fitch Ratings called the UK's budget a  "strong statement of intent." This statement helped the UK pound to improve to the strongest level for the day after the statement was made. A solid budget, investors say, could help to improve the country's confidence and bolster that AAA status rating.

Federal Open Market Committee

On Wednesday, the Federal Open Market Committee will make a rate announcement, analysts stated during the trading session on Tuesday. However, the very low rates currently in place are not likely to change, most investors believe. However,, the Fed's statement will be closely monitored by investors who are looking for any signs of what the monetary policy will change and likely tight up. Because of this pending announcement, the world markets seemed to be holding on and waiting for the news before making significant changes. Most will wait until after the announcement to react to what they hear then.

By the Numbers

By the late afternoon on Tuesday, the euro had moved from US $1.2320 as of late Monday evening to US $1.2304. The euro moved from Y 112.15 to Y 111.46. The US dollar moved from Y 91.04 to Y 90.58. The US dollar moved from CHF 1.1050 to CHF 1.1071. The UK pound moved from US $1.4754 to  US $1.4848 by the middle of the afternoon. The ICE Dollar Index moved the US dollar from 85.953 as of late Tuesday to 85.887.

US Data

Also affecting the markets during the Tuesday session was less than ideal news about existing home sales in the United States. The data released shows the existing home sales for May did not meet expectations. In addition, the falling US equities helped to scare off investors who were willing to invest in the riskier currency of the euro. The news helped to push the US dollar and the yen higher, as they are considered safer currencies to hold.


Also not out of the picture during the trading session were concerns over the euro zone's financial sector. Worries that the debt crisis is not fully disclosed continued to plague the euro for the day. The possibility that this debt could cause difficulties within the financial and banking system worried