Dollar at One Year Low
The already beleaguered US dollar fell to a one year low against a basket of currencies on Wednesday (Sept. 16th). Higher global share prices pared safe haven demand as investors sought higher yielding assets. The Japanese Yen reached a seven month high against the greenback after Japan’s incoming finance minister said that a strong yen had advantages for the Japanese economy. The euro to dollar rate hit a nine month high of $1.4715. The last time the euro hit $1.47 was in September 2008.
Link Between Wall Street and Risk Appetite
Massive US deficits also caused investor concern but higher stocks were the main driver of risk appetite. Ronald Simpson of Action Economics stated, “There’s still this persistent link between Wall Street and risk. With stocks going up, it continues to be very difficult for the dollar to rally.” Earlier in the year many analysts thought that the link between stock markets and risk appetite were weakening but that assessment proved to be premature. Traditionally the dollar trades lower when stocks perform well.
Japanese Finance Minister Will Not Intervene
The Japanese yen to dollar rate fell 0.9% against the yen to a seven month low of 90.13. The yen made gains after the incoming Japanese finance minister said he was opposed to intervention as long as market moves remained moderate. An unnamed trader in London stated, “It’s significant that Japanese officials don’t see the need to intervene at the moment … they’re not particularly worried about a strong yen. So the market is taking dollar/yen lower to see what’s around the 90.00 yen area.”
Pound May Hit $1,70 in the Near Future
Some currency experts are predicting the Pound to dollar rate will hit $1.70 in the near future. Karen Jones, a London based analyst, said, “Pound-dollar has sold off to its 50 percent retracement of the recent leg higher. “Given the recent weakness of the U.S. dollar, the risk has increased for the upmove to then reassert” towards $1.7040- $1.7050 in the next three months.
Quick Forex Tip: Euro currency trading requires a lot of research and investors must keep track of economic information from the twelve member nations. The economy of just one nation can affect the euro’s exchange rate. In 2010 political uncertainty and deficit concerns about Greece caused the euro to fall considerably in global forex markets. Euro currency trading can be exciting and very lucrative for investors who have done their homework.
