The US Dollar is again showing signs of strength. The American currency rose against most major currencies, gaining 0.9% against the Euro, 1.2% against the pound, and 1.1% against the Swiss Franc.
The strength of the dollar can be attributed to the following factors:
1. A decline in unemployment in the US, as shown by yesterdays jobs data. This doesn’t mean that the World’s largest economy is out of the woods, but it is certainly a sign of hope.
2. The ever spreading trouble of the Euro zone with Greece, Portugal, and Spain showing signs that they will require intervention by the more wealthier members of the EU to save their economy from ruin. This has been dragging down the Euro for weeks.
3. Increasing risk aversion in the world financial markets as a whole. This has usually worked in the USD’s favor due to its being seen as a haven currency.
4. The decline in the price of oil. Oil prices are quoted in dollars so there is usually a negative correlation between these prices.
All in all, it seems that my previous prediction for 2010 are coming true: good year for the USD, bad one for the Euro.
The Euro is really feeling the pressure at the moment. The Euro lost ground to the USD, Yen, and Swiss Franc in yesterday’s trading.
There was a slight turnaround as the Swiss National Bank began selling Francs and buying Euros during the Asian session is a desperate attempt to halt the growing power of its own currency. This helped the Eur/CHF gain ground, for the moment at least, but it’s unclear how far and how long such an intervention can really help the troubled European currency.
We shall have to wait and see.
Note: I just read an interesting article about how the news really
