Posted April 06, 2010
The US dollar falls against the euro, yen and pound in Monday trading. All eyes are on the Federal Reserve.
The yen, euro and the British pound gained in value in currency trading on Monday. The US dollar fell. The dollar fell 0.3 percent against the yen to 94.47. It also fell against the British pound to 1.5301, a loss of 0.24 percent and the euro to 1.351, down 0.16 percent.
The movements within the currency markets on Monday continued the trend seen on Friday. Many of the markets were closed on Friday in observance of the holiday and therefore, Monday’s moves are a reaction to the economic data released on Friday. The American economy continues to show signs of recovery, which is encouraging the traders to turn to the more risky currencies of the euro and push back against the US dollar.
There is a great deal of speculation on what the Federal Reserve plans to do with its low interest rate level. The officials will meet later this week. It is believed that the key interest rate will remain low for the short term, but some economists believe that the Fed will raise rates before the end of the year, though it has not signaled it would do so. The Fed has said that keeping interest rates low will continue to support the recovery in the US.
Economists are turning to the Fed to learn what the new data about the US economy means to the Fed itself. If the Fed announces plans to douse the market expectations for an early rate hike, this could result in the dollar giving back some of the gains it has seen recently.
The Australian dollar continued to climb in value in Monday and early Tuesday trading. It hit the highest level it has been at since September 2008 against the yen. This move occurred prior to the central bank meeting where the officials are likely to forecast an increase to borrowing costs.
The Australian dollar moved from 86.95 yen to 86.89 yen in trading. It reached as high as 87.21 during the day’s trading. Most economists believe that the Reserve Bank of Australia will raise the benchmark lending rate to 4.25 soon.
Also important in Monday’s trading is the Canadian dollar which moved closer to parity with the US dollar in trading. The US dollar moved closer to the Canadian dollar as crude oil prices moved above $86 a barrel. That boosts the appeal of currencies of commodity producers.
The Canadian dollar moved in the strongest fashion it has since July 2008 against the US dollar. The Canadian dollar gained 5.1 percent this year, thus far against the US counterpart. As oil is Canada’s largest export, the increasing value of oil will continue to push the country’s currency higher. Oil has hit an 18 month high. That, along with a strong Canadian fundamental economy, the strong US economy and a recovering global economy is likely to enhance the Canadian dollar further.