US Dollar Improves But Worries Still Present

Posted August 05, 2010

The US dollar manages to improve for the day. However, a faltering US economy still is on the minds of investors.


During the currency trading session on Wednesday, the US dollar managed to gain against many of its competitor currencies. However, even with good information out on Wednesday, investors are still anxious about what could be happening within the US economy.

US Data

There is no doubt that the main topic for the day in the currency markets was the improved economic data out of the United States. The news included better than expected reports on private employment and good information about the services sector in the United States. This helped to give currency investors at least some calm for the day after several days of bad economic data caused the US dollar to fall to significant lows. Investors have been worried that if the economic data does not improve, the Federal Reserve may take action to add more monetary stimulus to the system, which would further weaken the US dollar.

The US dollar managed to rebound from the eight month lows it reached overnight against the Japanese yen. It also helped it to hit the bottom of the three month fall against the euro that the currency hit on Tuesday. Nevertheless, investors are still being cautious. There is a new July nonfarm payroll report due out on Friday that could shed additional information on the pace of economic growth in the country’s jobs sector. Investors hope to see improvements in the US labor market and the US the economy in general.

As such, all currency trader eyes were on the economists who are predicting that there will be a loss of 60,000 jobs in the country on that report. Though many investors had hoped so, most economists did not change from these calculations.


Also important for the currency trading session on Wednesday was the euro’s movement. Less than ideal information out of the euro zone pointed to lower growth prospects. Further, the latest data shows a lower inflammation expectation for the coming year in the region. The European Central bank, however, could put some pressure on the euro and US dollar. The euro zone bank president, Jean Claude Trichet could hint, some experts say, of a divergence in the monetary policy of the euro zone and that of the US policy. It is not likely that he will make these comments after the European Central Bank meeting, mainly because the euro zone has slowing economies as well. 

By The Numbers

During the trading session on Wednesday, the euro moved from US $1.3233 to US $1.3169. The euro also moved from Y 113.60 to Y 113.65. The US dollar moved from Y 85.85 as of late Tuesday to Y 86.30. The US dollar moved from CHF 1.0390 to CHF 1.0523 for the day. The UK pound moved from US $1.5948 to US $1.5901. Further, the ICE Dollar Index moved the US dollar from 80.593 as of late Tuesday to 80.938 on Monday at the close of trading in New York.