Worries over debt problems continued to be the main driving force to the foreign exchange market. The euro rebounded from 4 yr lows with some recovery in confidence, while the GBP fell after it was warned of losing top credit rating.
US Federal Reserve Chairman Ben Bernanke said Monday that he did not expect the economy to go back into recession, which helped restored some confidence back to the market. Investors’ appetite for risk seem to pick up, and the dollar dipped against most major currencies.
The EUR rose above US$1.20 Tuesday after dropping to US$1.1876 Monday, the lowest level since March 2006.
During his Monday speech, Bernanke also said that the European leaders were taking the right steps to control rising deficits. The EU financial ministers pledged to control debt levels during their meeting on Tuesday. Both offered some comfort to the market.
Moreover, EU finance ministers approved Estonia’s adoption of the euro from January 1, 2011, a move seen by the market as the EU countries showing confidence in the future of the currency.
But the worries about the debt problems continue to weigh on the market, and investors are closely following this week’s debt auctions from Portugal and Spain. The euro pared gains in late afternoon trading, but remained above the US$1.19 level.
The sterling pound fell against the dollar after Fitch Ratings agency warned that Britain faces a “formidable” fiscal challenge and must cut its budget deficit faster to maintain its top credit rating.
In late New York trading, the Euro dropped to US$1.1925 from US$1.1936 late Monday, and the GBP sank to US$1.4382 from US$1.4474.
In other trading, the USD fell to 91.29 Japanese yen from 91. 78 yen, slipped to 1.1545 Swiss francs from 1.1618 francs, and dipped to 1.0515 Canadian dollars from 1.0574 Canadian dollars late Monday.—Paul A. Ebeling, Jnr. www.livetradingnews.com
