Financial Times Says US Credit Rating in Danger

All indications are that this week will not be a good one for the US dollar. It would appear that most forex traders and investors are subscribing to the ‘green shoots of recovery’ theory. A media report that said the credit rating of the US is threatened by huge deficits also put the greenback under pressure. Standard and Poor’s said that the costs of propping up government enterprises like Fannie Mae and Freddie Mac could cost the US 10% of GDP threatening the US’s triple A credit rating.

Markets in Buoyant Mood

The buoyant mood in financial and stock markets has also affected currency exchange rates globally. On Tuesday the euro to dollar rate rose 0.9% to a seven week high of $1.3695. The Pound was up 1.4% to $1.5336, it’s highest since January. The pound was bolstered by positive retail sales data, and stronger housing and industrial production figures.

Aussie and Kiwi Dollars Benefit From Risk Appetite

Changing currency exchange rates have also benefited both the Aussie and Kiwi dollars. The Aussie dollar rose 0.9% to $0.7647 while the Kiwi dollar rose 0.6% to $0.6049. The euro to yen rate rose 0.4% to 132.93 and the dollar to yen rate fell 0.4% to 97.18. The Australian dollar rose despite the country’s rising deficit and unemployment. A few traders are urging caution saying that economic figures are “less catastrophic” and do not point to global recovery.

Last Week’s Rally Extended

It would appear that last week’s rally in risk appetite has been extended into this week’s currency trading. US retail sales and industrial figures are expected this week and it remains to be seen how each set of data will affect currency exchange rates. Although some experts are advising caution it would appear that the ‘green shoots of recovery’ theory will dominate currency exchange markets.