US Dollar Takes a More Dominant Stance
Posted by Edward Dy on August 22nd, 2008
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Photo credit: kiptuch
Lately the US currency is on its way back up. Yes, the dollar is trending up! It has increased in value by more than 7 percent versus the euro in a few weeks. With a 20/20 hindsight, a number of forex experts believe that the support for the greenback had been on the rise for several months now.
The first break, experts say, for the Greenback came when the Fed ceased lowering interest rates in March. Then, at a meeting of the G8 nations, a number of high-ranking officials were unhappy about the US currency’s decline. They suggested that in order to avoid a further collapse of confidence, coordinated intervention should be effected. While this intervention was merely a verbal one, without any substantial backing, investors seem to have taken the hint.
The Federal Reserve’s reassurance of its commitment to a strong dollar policy also contributed significantly to the greenbacks resurgence. An easing commodity prices plus the proposed bailout of the two pillars of American’s mortgage industry, has led currency traders to think that the world’s economic policymakers now would simply let the dollar plummet further. However, the US dollar didn’t break through a resistance level at $1.60/euro (close to a record low), and has since rallied sharply.
“It seems that that the big money had committed to a long Dollar, and was waiting for the economic slowdown to spread to the Euro Zone. Once the Euro Zone began to experience a slowdown, it just became a matter of time before the short positions that had been built for several months would pay off,” according to the International Business Time.
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