US Dollar Rises Moderately to Begin Week

Monday, 18 October 2010

The USD was slightly higher to begin the week Monday - as investors tended to take short US dollar positions off the table to see where the currency is headed this week. The USD has been falling to new lows across the board (against most major currencies) in the last few months, so a slight breather makes sense at this point to reassess where the next move might be.

At 12:44pm today, the USD index had pulled off a 15 month low, and was headed modestly higher - albeit gradually. The higher move comes despite the notification to investors by the Federal Reserve that the Fed will resume quantitative easing measures this week to attempt to bounce the economy back from the lows that it is currently experiencing.

You'll no doubt remember that the Fed stopped lending massive amounts of money to banks and financial institutions a couple of months back - when they believed that the economy was going to recover without further lending support.

However, this recovery never really eventuated - and since then we have had a number of poor economic reports out - such as the jobs reports of last month, indicating a continuing slow down in the economy.

The Chairman of the Federal Reserve (Ben Bernanke) spoke on Friday about the state of the US economy, and this seemed to have very little impact on the market. This was probably because he simply confirmed what we all knew was true about the state of the US economy.

As we look forward this week - there are few major announcements on the horizon, however we will be closely watching currencies to see where they go in the face of the resumption of Fed lending at woefully low interest rates.