Equity Losses Fuel USD Appreciation
Posted on 04. Mar, 2009 by admin in USD Analysis, USD Economic Analysis, USD News
Slumping equity markets continue to put pressure on higher yielding currencies and in turn are boosting the Dollar. The Dow Jones Industrial Average posted another losing day yesterday. Falling equity markets are influencing the forex market by reducing risk appetite. The Dollar has been the primary beneficiary of these market conditions and yesterday was no exception. At the end the day, the Dollar was higher across the board.
Adding to the market’s aversion to risk was a Senate testimony from Federal Reserve Chairman Ben Bernanke. Bernanke remarked that the possibility remains for additional bailouts in the U.S. banking system. Investors did not take too kindly to this news and showed their disdain by buying Dollars. The theme of bidding up the Dollar as risk aversion climbs has been dominating this week’s trading.
Today’s trading may see a similar theme play out as major economic data is due to be released from the U.S. The ADP Non-Farm Employment Change is forecasted to show another large drop in unemployment numbers. Also the ISM Non-Manufacturing PMI looks to show deepening pessimism in the U.S. economy. The EUR/USD may drop further on negative news, perhaps even past the significant support line of 1.2400.
