Posted June 03, 2010
The Wednesday trading session in the currency market saw the US dollar improve against both the euro and the yen. The resignation of the Japanese Prime Minister was one of the reasons the dollar performed so well for the day.
The dollar was able to gain 0.1 percent over the yen during the day. However, during the trading day, it was as high as 1.3 percent during the trading session. The US dollar moved to Y 92.229 by the end of the day Wednesday. Against the euro, the dollar improved by 0.03 percent to end at US $1.225. Against the UK pound, however, the dollar did not move much, but ended the day at US $1.465.
The main fuel behind the fall of the yen during the Wednesday trading session was the resignation of leader Yukio Hatoyama. During the trading day, the Japanese Prime Minister announced his resignation, which came as a surprise to most. This let the yen retreat against most major currencies for the trading session on Wednesday.
Hatoyama's resignation put more pressure on the country's currency as investors became unsure of what the political stability of the country was. This pressure on the yen led to the concern that the next leader may favor a weaker Japanese yen. Many believe the current finance minister, Naoto Kan would become the country's next Prime Minister. However, Kan does favor a weaker currency. The yen could perform poorly in the coming days until an election occurs later during the week.
For the day, the euro only showed small losses against the US dollar. This came after a day on Tuesday of the euro hitting the weakest lows it had seen for four years. It touched US $1.2111 at that lowest level.
The euro was not traded down heavily for the day in part because investors were happy to hear news out of several countries that they do not play to change their reserve currency portfolios away from the falling euro and the US dollar any time soon. Countries that made the pledge on Wednesday included Brazil, Russia, South Korea, India and Japan. Even this all important news did not give investors enough fuel to push the euro higher for the day. Investors believe that the euro is no longer the strong currency it once was. Even positive news cannot drive the euro up.
Also affecting the euro during the trading session are still concerns over the close to US $ 1 trillion bailout package in Europe. Investors do not have all of the information they need to make important decisions about buying into the euro. Further, concerns over the euro zone in total still hang in the air. Investors are not ready to move towards the euro as it is too risky. Instead, the US dollar offers a better level of protection for those in the market. Economic instability throughout the euro zone continues to hold back the euro and it is likely to continue to do so going forward.