Dollar Gains on Euro
The US dollar will probably benefit from the ongoing Greek fiscal crisis but some experts say dollar gains will be limited by concerns about the future of the US economy. News stories about Greece’s fiscal crisis have pressured the euro in recent trading sessions. The crisis has caused tensions among EU nations and ECB President Jean Claude Trichet said that Greece will receive no special treatment. In a recent report foreign exchange strategist Michael Hart wrote, “The sharpening internal strains illustrate that the euro- zone is far from being an optimal currency union. These internal strains are independent of the external value of the euro but will in turn continue to undermine it.” Despite the Greek government’s plan to hike taxes and cut spending the country’s fiscal problems are expected to weigh on the euro well into 2010.
New US Data Due This Week
Problems in other EU nations, most notably Portugal, Ireland, Italy, and Spain have pressured the euro. Next week investors will focus on new US economic data including U.S. net capital flows, producer prices, housing starts, and initial jobless claims. Recent US data has been mixed and traders and investors remain concerned about the pace of US recovery. Tim Evans of Lind-Waldock stated, “The markets will possibly be nervous with U.S. data that’s not favorable. If those numbers come in bearish, then that would further discount the dollar. The jury is still out about the U.S. economy. People are concerned that the optimism we saw with good U.S. numbers may be waning a bit, that this recovery may be slowing.”
Aussie and Kiwi Decline
On Friday the yen and US dollar rose against most major currencies as falling stocks sent investors to the safe haven offered by both currencies. Last week’s winners, the Aussie and Kiwi dollars fell as the pace of global recovery slows paring demand for higher yielding assets.
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