Posted August 20, 2010
The US dollar improved against the euro. Investors seek safe harbor.
During the currency trading session on Thursday, currency investors turned to the safety of the US dollar, moving away from other currencies, especially those that are considered high yielding, as a method of protection. The US dollar improved during the trading session against the euro and most other currencies. Concerns focus in on the US's slow pace of recovery currently taking hold, as more reports show.
US Economic Data
The main problem within the currency trading markets on Thursday was the lack of good information on the US economy. During the trading session, more disappointing news was released about the US employment numbers and manufacturing data. Both of these reports hurt the US equity markets substantially. Those currencies around the world that are commonly associated with economic growth fell during the day. This includes the Canadian dollar, Australian dollar and the New Zealand dollar.
During the trading day, initial unemployment claims were released out of the US. They showed a rise by 12,000 to 500,000 for the week ending on the 14th of August. That is the highest level unemployment rates have been at since November 14, 2009. That showed investors that the US labor market may be in trouble, still. Most economists had expected to see a decline in the unemployment numbers, so an increase was significantly worrisome.
Investors are worried about the poor US data and are wondering if there is likely to be further deterioration of the economy in the country in the coming weeks and months, experts warn. It is also important to note that it is still the summer season, which usually exhibits lower trade volume. In return, even small actions within the marketplace tend to have a more exacerbated look during the trading day.
High Yielding Currencies
The other currencies, Canadian dollar, Australian dollar and the New Zealand dollar, called high yielding currencies, feel during the day as a result of this data's output from the US. As information was released, these currencies began to fall for the day. In Canada, weak wholesale sales also hurt the country's currency. In New Zealand, input prices are on the rise, which worried some investors. Also, there is news that the Fitch Ratings and Standard and Poor's both placed the A + rating of BHP on watch. This signals potential trouble.
The losses of the US dollar against the yen were likely due to the possible intervention of the Japanese government. The Bank of Japan may intervene in the markets or in some other way improve monetary policy if the yen continues to rise in value.
By The Numbers
During the currency trading session on Thursday, the euro moved from US $1.2860 to US $1.2820. The euro moved from Y 109.87 to Y 109.40. the US dollar moved from Y 85.43 to Y 85.29. It did fall to Y 84.89 during the trading day. The US dollar moved from CHF 1.0420 to CHF 1.0325. The UK pound moved from US $1.5605 to US $1.5606.