Posted January 20, 2011
Dollar at 8 week low against euro. Europe’s debt situation improves.
The US dollar fell to an eight week low against the euro during the Wednesday currency trading session. This happened as confidence in the dollar fell and improvements in the trader’s outlook on the euro improved. Investors are becoming more confident in the European sovereign debt situation and as such have moved towards the higher perceived risk of the euro. In addition, positive economic data out of China also was encouraging to investors.
The US dollar index moved from 78.972 as of the end of trading in North America on Tuesday to 78.594 by the end of the session on Wednesday.
The US dollar was also plagued by the less than ideal economic news out of the US. During the trading day, a report showed that US housing starts in the month of December slowed more than what most believed was likely. Many investors saw this, as well as the stronger Chinese yuan led to the decreasing value of the US dollar, but it was really the improved confidence in the euro that lowered the US currency during the trading day.
The euro moved from US $1.3388 at the end of the trading session on Tuesday to US $1.3469 by the end of the Wednesday trading session. During the currency trading session, the euro moved as high as US $1.3538 during the session. That is the highest the currency has been since November.
Part of the reason that the euro was performing so well was the move to the more impressive data out of China on the economic condition of the country. The country is expected to release its gross domestic product and its inflation data on Thursday, but most experts believe it will be positive. Most reports indicate that consumer prices in China rose 4.6 percent annual rate in the month of December, which is slightly down from the 5.1 percent rate it was at in November, a positive sign for inflation.
Portugal completed a sale of 12 month Treasury bills during the session for a total of 750 million euros. That, and positive economic data out of Germany helped give investors the push towards the euro.
The US dollar was also down against the yen during the trading session on Wednesday. It moved from Y 82.62 at the end of the session on Tuesday to Y 8204 by the end of the Wednesday session.