Posted October 28, 2010
US dollar improves. Australian dollar falls sharply during trading.
During the currency trading session on Wednesday, the US dollar improved to its highest level in three weeks. This comes after new reports indicate that the Federal Reserve meeting may offer some results that would allow for the Fed to take smaller steps into stimulus for the US economy, rather than the more significant steps that many had anticipated occurring. The ICE Dollar Index moved the US dollar from 77.670 as of late Tuesday night in trading in New York to 78.273 by the end of the day Wednesday. This is the highest value it has been at since October 20.
It is likely that the Federal Reserve will develop a Treasury bond purchase program which would be a much smaller move than most investors expected. It does not meet until next week to make these decisions, though. The current currency market is very focused on the anticipated movements of the US Federal Reserve. As such, each report that indicates a new potential plan for the Fed leads to the US dollar improving or falling, thus affecting the other currencies throughout the world. There is no official indication that the Fed will take any move during the next meeting.
The euro also moved during the Wednesday session, but it slipped. It moved from US $1.3850 as of Tuesday night to US $1.3762 by the end of Wednesday. The move was likely due to the debt concerns of Greece and Portugal coming back to the surface.
During the Wednesday trading session, the yen moved up slighting from Y 81.46 as of Tuesday night’s session to Y 81.73 by the end of Wednesday in North American trading. This is the highest level the US dollar has reached since October 13th.
The UK pound fell during the Wednesday session. It moved from US $1.5839 as of Tuesday evening to US $1.5758 by the end of Wednesday trading.
During the Wednesday trading session, the Australian dollar also took a hit. It fell after slightly weaker than what was to be expected data was released that indicated that inflation was high. Due to this, investors believed that it was unlikely that the Reserve Bank of Australia would take steps to raise the key lending interest rate, dampening the potential for profits. The Australian dollar moved from 98.53 US cents to 97.05 US cents by the close of trading in North America.