Dollar Gains on Risk Aversion
The US dollar gained on Friday as US corporate earnings showed mixed results prompting a slight return to risk aversion. Corporate giant General Electric reported that second quarter profits fell by almost 50% while Citigroup posted smaller than expected losses. Earlier in the week Goldman Sachs, Intel, and JP Morgan posted stellar earnings but investors remained concerned about the health of the economy which affected currency exchange rates. Steven Butler of Scotia Capital stated, “There’s reason for optimism, but it seems we need to see a grand slam for people to get carried away. This underlines that the market is still skeptical and afraid to get overextended.”
Euro Fails to Hold Gains
The euro which had traded at $1.41 earlier in the week failed to hold on to earlier gains reflecting uneasiness among investors. The euro has fallen 0.5% to $1.4075 against the dollar and fell 0.5% against the yen trading at 132.10. The pound also fell against the dollar losing 0.9 % and traded at $1.6285. Many forex traders and investors felt that markets had no clear direction last week making trading difficult. Last week’s bombings in Jakarta Indonesia sent short lived shockwaves through global forex markets. Melvin Harris of Advanced Currency Markets said, “There’s still an underlying tone of risk aversion looming. People don’t feel comfortable with the economy.”
Dollar Pares Losses
The US dollar ended last week by recovering losses suffered earlier in the week after earnings posted by Goldman Sachs and Intel lifted risk sentiment prompting investors to seek higher yielding currencies and assets. Markets ignored euro zone trade data that showed a 1.9 billion euro surplus and comments by Japan’s top financial diplomat who said the US dollar would remain a core asset of Japan’s foreign currency reserves.
Next Weeks Economic Calendar
Next week’s economic calendar includes June’s leading economic indicators which are due Monday. On Wednesday the weekly report on U.S. petroleum supplies is due and on Thursday weekly jobless claims and the report on June’s existing home sales are due.
