Dollar at Three Month High vs. Euro

The US dollar is now at a three month high against the euro and many currency experts believe that the dollar will sustain recent gains. The dollar also gained on the six major currencies of its major trading partners. Investors remain concerned that recent economic improvements may stall putting a damper on risk sentiment. The dollar index gained 1.2%, rising to 77.94 it’s highest since September 8th and the biggest one day gain since December 4th. The euro was pressured by the second Greek downgrade in a week. Earlier Fitch’s had cut the Greek rating from A- to BBB+ and Wednesday Standard and Poor’s cut Greece’s rating to BBB-. Standard & Poor’s said that spending cuts announced by Greek Prime Minister George Papandreou were not likely to produce a ‘sustainable’ reduction in the nation’s sovereign debt.

Fed’s Assessment Positive

After the Fed’s positive assessment of the US economy many traders believe the dollar will hold recent gains. Steven Englander, of Barclay’s stated, “It’s the first time in a year we look at the dollar with the potential to rise over an extended period. The same safe haven characteristics that helped the dollar in 2008, and hurt it from March through November, are helping it again. The gap in U.S. growth relative to Europe is beginning to widen.” Although the Fed said rates will remain at record lows the central bank said it would allow some emergency measures to expire in February 2010. The Fed gave no indication of when it would raise rates.

Pound Falls on Retail Sales Data

The pound fell to the lowest level in two months against the US dollar. The pound was pressured by a decline in UK retail sales and deficit concerns. The pound fell 1.2% against the dollar trading at $1.6136, down from $1.6334 on Tuesday. The pound also fell against the yen. The pound fell 0.6% against the yen to 145.73 yen but gained 0.3% against the troubled euro trading at 88.73 pence. Lee Hardman of Bank of Tokyo- Mitsubishi Ufj Ltd. Stated, “The retail sales data tend to be very volatile. Sterling appears to be particularly vulnerable against the dollar.”

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.