US Dollar Gains On Yields

Posted December 16, 2010

US dollar improves for day. Euro zone concerns force investors away.


US Dollar

The US dollar improved on the day against the euro. This comes after a variety of factors pushed investors back to safer ground. The US dollar also improved against the UK pound and the Japanese yen. This came as the US Treasury Bonds turned higher. That made the asset class a more attractive investment to overseas investors. In addition to this, the dollar remained on solid ground due to a number of economic reports out all of which showed benefits.

The US dollar index moved the US dollar from 79.25 as of late in North American trading on Tuesday to 80.190 by the end of the trading session on Wednesday.  

The US dollar improved during the day as a report from the government showed that US consumer prices rose for the month of November by 0.1 percent. In addition, reports indicated that manufacturing in the New York area was improving in the month of December. And, the Federal Reserve stated that the industrial production numbers also improved in the last month. This was an improvement at a higher level than what many economists predicted. 

On Tuesday, the Treasury Department in the US stated that it would leave the key lending rate unchanged and that it would continue with its long term asset buying program to improve the US economy.

The Euro

In addition, the potential rate lowering in Spain is another factor. During the currency trading session, Moody’s Investors Services sated that it was placing Spain’s Aa1 credit rating under review, the first step in the potential downgrade process. This is occurring just ahead of the meeting of European officials. The euro zone debt concerns are likely to remain problematic for some time, until some measure or policy helps to improve them. 

The euro moved lower against the US dollar. The US dollar moved from US $1.3411 as of late in North American trading to US $1.3229 by the end of the Wednesday session. Investors are likely move away from the euro whenever there is an indication of further euro zone financial problems, seeking the perceived safety of the US dollar instead. 

UK Pound

The UK pound also weakened against the US dollar during the session. It moved from US $1.5785 as of the end of trading in North America on Tuesday to US $1.5548 by the end of trading on Wednesday.