Posted October 20, 2010
The US dollar improves 1.6 percent. Move comes after US Treasury secretary says there is no devaluation of the currency.
During the trading session on Tuesday, the US dollar improved by the biggest amount in one day since August. This comes after the Chinese government introduced a rate hike that was stemmed by concerns that the Chinese economy, which is the world’s fastest growing, could put a strain on global growth.
Also pushing the US dollar higher during the day was comments from Timothy Geithner who is the US Treasury Secretary. He pledged that Washington would not move to devalue the US dollar. This helped to move the ICE Dollar Index higher from 76.922 in North American trading as of late Monday to 78.041. It was able to move as high as 78.276, which, had it stuck would have been a 1.8 percent advance for the currency since August 11th.
The euro fell from US $1.3999 as of Monday evening to US $1.3733 for the day against the US dollar. That was a 1.5 percent loss and the biggest loss the euro has seen since September 22nd. The euro did manage to trim some of its losses after ZEW, the Center for European Economic Research released information about October’s investor sentiment.
For the first day in nearly a week, the US dollar managed to climb higher against the Japanese yen. It moved from Y 81.23 in late trading on Monday to Y 81.51 during the trading session on Tuesday. The US dollar fell to its lowest point in 15 years against the yen last week at Y 81.
Also effecting the market during the day was the People’s Bank of China and its unexpected move to lift deposit and lending rates within the country by a quarter of a point. This is the first time since December of 2007 that the central bank has taken steps to tighten up monetary policy in the country.
Due to China’s move, those currencies that are tightly linked to economic growth, including the Australian dollar, Canadian dollar and the New Zealand dollar, all fell during the day by 1.6 percent. Canada’s central bank kept rates unchanged during a rate setting meeting on Tuesday. Meeting minutes out of the Reserve Bank of Australia showed that currency investors have less likelihood of seeing a rate hike in the near future either. These currencies all fell against the US dollar.