Dollar and Swiss Franc at Four Month Low

Both the US dollar and the Swiss Franc hit four month lows against a basket of currencies on Wednesday. Continuing risk appetite has put pressure on the dollar as safe haven demand fades. The dollar was pressured further by an article in the Financial Times that pointed out the risk of the US losing its triple A credit rating due to rising deficits. A forex trader for a Japanese bank stated, “I think the market overall wanted to test the (dollar’s) downside and the FT story linked well with that trend.”

Euro Up Against Dollar

The euro to dollar rate was up 0.2% from Tuesday at $1.3674 after hitting a seven week high of $1.3722. Confidence in money markets affected currency exchange rates as the LIBOR hit a record low of 0.906% on Tuesday. The dollar to Swiss franc exchange rate hit a four month low of 1.0977 and the dollar came under even more pressure after remarks by Japan’s opposition finance spokesman who said that Japan should avoid purchasing US bonds in dollars due to currency risks.

Dollar Index at Four Month Low

The dollar index hit a four month low of 81.871 .DXY further affecting dollar exchange rates. Optimistic remarks by Fed Chairman Bernanke stating that the results of bank stress tests were ‘encouraging’ and that the dollar is likely to remain the world’s reserve currency failed to help the US dollars exchange rate on forex markets.

UK Retail Sales Rising

The Pound to dollar rate was helped by figures that showed UK retail sales rising at the fastest rate in three years and house prices declining at their slowest rate in fifteen months. The ‘green shoots’ of economic recovery theory has dominated forex exchanges since last week. The buoyant mood in markets has had an effect on global currency exchange rates. Although some forex traders see the recent economic figures as “less catastrophic” and recommend caution the ‘green shoots’ theory is expected to dominate currency trading this week.