US Fed's cautious optimism about the future helps Euro and Pound

Thursday, January 29, 2009

The US Dollar fell against the Euro and Sterling yesterday as Forex traders and investors gained confidence which translated into an increased risk appetite as the US government moved to shore up the economy. Yesterday, the US Federal Reserve left interest rates at 0-.25% announcing that they will use all tools at their disposal to continue fighting the economic downturn. The Fed declared yesterday that the economy has indeed worsened since their last meeting in December, however that additional cuts to the key interest rates were unwarranted at this time.

In what was seen by the broker trading community as a signal of strength in action, the Fed said that they will continue to fight the economic woes at the source by supporting the functions of the financial industry by purchasing large quantities of mortgage backed securities, CDO’s and agency debt. This specific announcement pleased those trading and investing in the daily FX markets who fled the perceived safety net of the greenback for some risk and potentially greater reward. The Euro rose to slightly above $1.33 against the dollar while the Pound continued its climb trading above $1.43 – a more than 1% increase.

The Japanese Yen, another perceived safe haven currency also experienced losses today against the Euro and Pound as Forex investors digested the countries influx of cash late Tuesday to shore up businesses and financial companies. The move is widely seen as Japan’s way of curbing the recent strength of the Yen which is believed to hurt exports, the driving force of the Japanese Economy. The US Dollar rose one percent to just over 90 Yen, coming close to a key support level of 90.20. A move above this mark could signal a greater gain for the us currency against its Japanese counterpart. The Euro also made gains on the Yen, rising more than 1% to 119.02 as investors traded the relative safety of the Yen for the promise of greater returns from a Euro rebound.


2 comments:

Mandeep January 29, 2009 at 3:41 PM  

hi pallavi USD will be back to the level sooner or later frm where it started climbing up...its appreciated against EURO and other currencies in past because of OBAMA effect....not the grip wud be loosen and according me euro/usd will go past 1.3700 sooner or later.......and as u mentioned tht for the benefits of exporter japanese govt. dont want yen appreciating against USD so here the movement must be range bound ...pallavi japenese are basically export oriented country and their primary requirement is crude only w...fallin crude prices appreciate yen value and at present crude has fallen 70% frm its high.....so for the exporters and directly for their economy they want yen not to appreciate anymore.....

Casey Stubbs February 2, 2009 at 9:12 AM  

Yes, that optimism sure went away on friday with all that negative news on the us economy. The dollar rose again.

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