The Euro just wrapped up its best week against the dollar since December 2008. Yesterday’s gains were minimal as the Euro edged upward by 0.1%, but for the week the European currency rose by 1.9% which is an impressive gain. Currently, the Euro is worth $1.2919.
What caused the Euro’s surge?
It appears that stock prices increases have weakened the dollar. The US currency enjoyed its new status as a haven in a turbulent market place and saw more and more investors pouring money into it as the best bet in a financial world in turmoil. However, recent reports from financial giants like Citibank and Bank of America, prompted a renewed optimism in the markets which rose sharply during a 3 day rally at the closing of markets on Friday.
With this renewed optimism, the dollar’s haven position is no longer held in such high esteem. As more money enters into the stock markets, more money is leaving the dollar. Therefore, the US currency is weakening.
It seems that for the time being at least, the value of the dollar is closely related to the sentiments about the stock markets. The high stocks are, the lower the dollar will go and vice verse. This isn’t a timeless relation of course. Sooner or later, this tie between stocks and dollar will break and a new set of market rules will establish. But for the time being, it is important to take note of how stocks are likely to behave in the new future. There may be significant trading opportunities based on this criterion alone.
