Dollar Pulls Back From 14 Month Low vs Euro
The US dollar pulled back from a four day decline against the euro after hitting a 14 month low against the currency earlier in the week. A third quarter drop in earnings by General Electric and Bank of America and declining US consumer sentiment triggered a rise in risk aversion aiding the struggling US dollar. Some forex traders believe that the dollar’s decline was overstated and recent signs of US recovery would be dollar positive. Adam Cole of RBC Capital Markets stated, “The U.S. dollar is trading better on better news now. At the same time we have ECB speakers stepping up their concern on the dollar’s weakness and that could likely stop the drop in dollar-euro.”
Pound On Track For Gains
Earlier in the week European Central Bank President Jean-Claude Trichet said that US support for a strong dollar was “extremely important.” The dollar rose to $1.4914 after hitting a 14 month low of $1.4968 earlier in the week. The pound is on track for its biggest gains against both the euro and the dollar in four months as investors bet that the Bank of England may stop buying bonds. Yesterday the London based Financial Times quoted Bank of England Markets Director Paul Fisher who said that policy makers may suspend asset purchases reserving the option of “doing more later.”
Strong Dollar Essential For Stability of Global Economy
The DXY rose 0.2% to 75.648 but has suffered a yearly decline of 7%. Yesterday in Frankfurt ECB President Trichet stated, “It is extremely important that the U.S. authorities, including the Treasury, the Secretary of the Treasury and the chairman of the Fed, would pursue policies that take into account the fact that a strong dollar is in the interest of the U.S. Excess volatility is an enemy from the standpoint of the stability and prosperity of the global economy.”
Yen Suffers Second Weekly Loss vs Euro
The yen vs. euro rate suffered a second weekly loss and was the worst performed among the 16 most traded currencies. Japanese Finance Minister Hirohisa Fujii said that governments are responsible for the strength of their currencies and that those currencies need to reflect the strength of their respective economies.
