The Bulls are Back for Now, Dollar Pays the Price

Tuesday, May 5, 2009

USD: Risk Appetite Returned with a Loud Bang

As investors bought up European and American stocks the US Dollar suffered on Monday as risk appetite returned with a loud bang. Part of the reason for the lack of demand for the safe haven Dollar was a report out of China that showed a 9 month high in manufacturing activity and a 3.2% rise in US home sales. The theme of Monday seemed to be a fundamental shift in investor attitude as fears of a deepening recession retreated and the bulls came back – if only for a short while. Thursday the US government will release the results of the bank stress tests and already there is speculation that the results will not be received well. Wells Fargo and Citigroup, it is rumored, will require additional funding and Bank of America is denying that they will. In all, of the 18 banks surveyed, it is thought that nearly half of the banks will require more capitalization. Forex online experts says if this turns out to be accurate, it is a sign that things might not be as rosy as investors feel they are today.

At 9:00PM GMT, the Dollar was down .93% to the Euro to 1.3392, down .3% to the Japanese Yen to 99 even, down .42% to the British Pound to 1.4982 down .75% to the Canadian Dollar to 1.1763, down 1.14% to the Australian Dollar to .7387, down .84% to the New Zealand Dollar to .5741 and down .75% to the Swiss Franc to 1.1271.

EUR: Investors Cautious on the Euro Ahead of the ECB’s Policy Meeting

The Euro fell early on Monday as Axel Weber; a European Central Bank member said that Germany will not start to see economic growth until the second half of 2010. However after the news out of China and the US, the Euro recouped some of its losses. Investors still seem to be cautious on the Euro ahead of the ECB’s policy meeting. The ECB is expected to lower their core interest rate by 25 basis points to 1% and announce a quantative easing plan that includes the purchase of securities to stimulate growth and lending in the 16 country Euro zone. Until now, ECB members have been holding a public debate about how far to go with the stimulus plan and investors will find out who won.

At 9:30PM GMT in the broker trading boards, the Euro was up .83% to the Japanese Yen to 132.61, up .52% to the Pound to .8938, up .22% to the Canadian Dollar to 1.5762, up .16% to the Swiss Franc to 1.5096 and down .24% to the Australian Dollar to 1.8125.


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