Dollar Rebounds

The US dollar rebounded from a week of volatile trading on Friday and the euro to dollar exchange rate fell after data showed a record drop in Euro Zone industrial production. The dollar was also helped by remarks by the Russian finance minister who said that the US dollar’s role as the world’s reserve currency is secure for the near future. Earlier in the year there had been calls by Russian politicians for a different shared reserve currency.

Euro Falls Against Dollar and Yen

The euro was weakened by dismal economic data and fell against the US dollar and the Japanese yen after a newspaper report said that tougher credit terms are hurting German businesses. Brian Kim of UBS AG stated, “Euro zone industrial output disappointed already weak expectations. The data will add to calls for a prompt start to the ECB’s proposed covered bond purchasing scheme and the euro weakened on the news.”

Dollar to Remain Reserve Currency

A statement by Russian Finance Minister Alexei Kudrin helped the greenback and affected currency exchange rates. Kudrin said the US dollar was in “good shape” and added that at present there is no substitute for the dollar as a reserve currency. Kudrin made the statement just days after his superior President Dimitry Medvedev along with Chinese central bank Governor Zhou Xiaochuan suggested the need for an alternative reserve currency. Michael Woolfolk of Bank of New York Mellon stated, “At this point there’s no alternative to the U.S. dollar in terms of deep liquid markets and trading 24-7 globally. Nothing even comes close to the dollar in terms of reserve status.”

Investors Betting US Will Recover First

On Friday the dollar rose against all 16 major currencies except the yen and the euro to dollar rate fell to $1.3854 after hitting a recent high of $1.41. The dollar was also being bolstered by the belief of many forex investors and traders that the US will be the first to recover from the current global recession. Currency exchange rates were also affected by the statements of Japanese Finance Minister Kaoru Yosano who said, that the Japanese government has, “complete trust in the fact that the United States views its strong-dollar policy as fundamental. Our trust in Treasuries is absolutely unshakable.”

Volatile forex trading is expected this week but for now the dollar seems secure.