Dollar at the Highest Since January | IFCM UAE
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Dollar at the Highest Since January - 4.10.2011

US Dollar Asian shares dropped, extending yesterday’s losses of European and US stock markets. Japanese Nikkei Stock Average index lost more than 1% in Asian trading hours, while S&P 500 declined by 2.85% yesterday. Investors are still seeking safety in US Treasuries, lowering again the yield of the benchmark 10-year notes to 1.75% and supporting the US dollar, which strengthened yesterday to the highest level since January 13, according to the dollar index, which measures the US unit against a basket of six currencies. The main reason of risk aversion comes from Europe failing to find a solution for the crisis and the markets reacted accordingly, despite manufacturing in the US unexpectedly accelerated in September, propelled by gains in exports and production. The Institute for Supply Management manufacturing index rose to 51.6 last month from 50.6 in August. Euro The euro depreciated against the dollar to the weakest level since the middle of January 2011 (1.3163) after European leaders mentioned that bondholders may have to take bigger losses on Greek debt in a second aid package due to a Greece’s deteriorating economic outlook. Finance ministers estimated in July that private sector might need to contribute 50 billion euros to a 159 billion-euro rescue. “As far as private sector involvement is concerned, we have to take into account that we have experienced changes since the decision we have taken on July 21,” Luxembourg Prime Minister Jean-Claude Juncker said yesterday. “These are technical revisions we are discussing.” The ministers have also postponed a decision on the next 8 billion-euro bailout to Greece till the next meeting on October 13, increasing uncertainty in the market and forcing investors to sell the single currency. Japanese Yen The yen strengthened yesterday against the dollar and the euro. Japanese officials even called on Europe to accelerate the Greek financial aid installment as investors' concern about the European crisis is deepening and driving the euro to a decade-low against the yen. “In order to halt the extreme strength in the yen and weakness in the euro, Europe should make the process of rescuing Greece more transparent to the markets,” Japanese Finance Minister Jun Azumi said this morning. The euro fell today to 100.75 against the yen, the weakest since June 2001, before reports that may indicate the European economy is slowing as governments implement austerity measures. Australian Dollar The aussie touched its lowest since 21 September 2010 against the greenback (0.9455) after Australia’s central bank signaled it may lower the benchmark interest rate if necessary as inflation pressures ease. “An improved inflation outlook would increase the scope for monetary policy to provide some support to demand, should that prove necessary,” the Reserve Bank’s president Stevens said in a statement. “It will take more time for evidence of any effects of the recent European and US financial turbulence on economic activity in other regions to emerge.” Today however the rate was kept unchanged at 4.75%, while more economists predict a 50-basic points cut in the nearest term with the central bank’s “more consistent” inflation forecast within 2-3% target range in 2012 and 2013.
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