The Currency Converter

US Dollar Exchange Rate News: The dollar duly made gains against both the pound and the euro

November 23rd, 2010

Having initially tumbled against the euro after news of a bail out of the Irish economy was announced, like the pound, the dollar recovered against the single currency in the afternoon after the call by the junior coalition partners in Ireland for an immediate general election.

The political uncertainty in Ireland and the threat of fear of ‘contagion’ from Ireland to Portugal and Spain drove equity markets down worldwide with the Dow Jones losing over 130 points within 2 hours of its opening. This strengthened the US dollar as investors’ sought the dollar’s ‘safe haven’ status. This was further enhanced by heavy falls in the Asian stock markets overnight with news of what some analysts are suggesting is the most serious skirmish between the two Koreas since the end of the Korean war in the 1950′s.

Meanwhile in a quiet data day, US Federal Reserve chairman Ben Bernanke criticised countries like China for running large trade surpluses. In a speech to the European Central Bank he stated that “Currency undervaluation by surplus countries is inhibiting needed international adjustment”.

He said that by buying dollars, these countries were hurting the economic recovery in the US and the global economy with it. Bernanke also defended the Fed’s policy of “quantitative easing”, which has recently been criticised by China and Germany amongst others.

China, Germany and others have attacked the Federal Reserve in recent weeks for its decision to purchase another 600 billion dollars of US government debt in a bid to stimulate the US economy. They say that the policy will unfairly devalue the dollar in currency markets and that this could lead to inflation and asset bubbles elsewhere in the world. The Chinese also argued the Fed had failed to take account of its responsibility for protecting the value of the dollar as a global reserve currency.

The dollar duly made gains against both the pound and the euro yesterday afternoon.
This afternoon sees the revised GDP data for Q3 published in the US which will be studied by analysts for signs of the economic conditions in the US economy.

Written by Tony Redondo

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