US dollar rate is losing ground against the euro exchange rate

Foreign Exchange - Currency Outlook

The US dollar rate is losing ground against the euro exchange rate and other majors this morning after the Fed statement calmed risk aversion and promoted risk appetite. On the hourly chart of the euro, you can see a spike to 1.4239 and a bigger spike down to 1.4120 in the Fed statement hour, suggesting that not everyone understood the statement immediately. Those who had been buying euros in anticipation of the outcome got their stops hit, and then the euro exchange rate turned into the close and started rising in earnest. From the 8 am New York open at 1.4142, the euro ended the day at 1.4201 - but after the US close, the euro took off higher at 1.4282 so far.

Note that 1.4280 is about the midpoint of the downside 6-hour breakout bar last Friday. The euro rate has to surpass this level to form a convincing uptrend restoration. The announcement that European GDP growth is up has failed so far to get that effect, which is a little surprising. If the dollar exchange rate rose last week on seemingly good economic news (despite the smaller-than-expected drop in payrolls clearly a statistical fluke), why would the US dollar rate not rise on the Fed statement, which is pretty close to a proclamation that the recession is over?

Reuters reports that the dollar vs japanese yen, rising off yesterday’s low at 95.10 to 96.30 so far today, is influenced by “Japanese investors repatriating funds related to $27 billion in coupon payments on U.S. Treasuries due on Aug. 15. In addition, $61 billion in coupon securities mature on the same day.” This is capping the dollar's rise. Where does the dollar/yen fit in the risk appetite profile? The yen is supposedly a bigger beneficiary of risk aversion than the dollar, so dollar/yen is a duel for which currency gets more relief when fear abates. Besides, why would the Japanese will not turn around and re-invest proceeds back into foreign markets, as is their wont? Only if fear were really high, and rising global stock markets are not sending that signal. We have to go through this laborious process in thinking about the yen because some of the recent moves are so hard to understand.

Pounds to US Dollars = 1.6579
Pounds to Euros = 1.1610
Euro to Pounds = 0.86089
Pounds to Australian Dollars = 1.9690

Bye For Now

Barbara Rockefeller
Foreign Exchange Trading
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