Euro Posts Largest One Day Drop

Today (March 27th) the Euro posted its largest one day drop against the US dollar in two months. Forex traders took note of a remark by Germany’s finance minister Peer Steinbrueck who said that fiscal irresponsibility could put the Euro at risk. The remarks combined with weak industrial orders triggered a sell off of the Euro.

German Impact on the Euro

Forex traders have long known that Germany has a direct impact on the performance of the Euro. Fabian Eliasson of Mizuho Corporate Bank in New York echoed this sentiment when he stated, “Germany has a very direct impact on how the euro performs.” US stocks fell on Friday and the Euro was down 1.9% trading at $1.3280. Late last week a few Forex traders had predicted a good week for the Euro and thought the Euro could trade as high as $1.40.

Euro Also Falls Against Yen

The Euro also fell 2.8% against the Japanese Yen and traded at 130.08 yen. The dollar gained despite reports that the greenback may be in trouble as the world’s reserve currency. Remarks by a senior official at Japan’s Ministry of Finance and senior Russian central bank official that the dollar will remain the world’s reserve currency boosted the dollar’s performance among forex traders and investors.

Yen Rallies

The Yen rallied after fund repatriation by Japanese investors and a change in tax regulations is expected to increase the flow of funds into Japan. On Wednesday remarks by U.S. Treasury Secretary Timothy Geithner stating he was open to the idea of increased use of an IMF currency basket as a reserve currency sent the dollar lower.  Some forex traders interpreted the statements as negative for the dollar.

The dollar has staged a comeback against the Euro but speculation about the future of the dollar’s status as a reserve currency has many forex traders worried.