Dollar Pulls Back From 15 Month Low

The US dollar rose from a fifteen month low as investors tried to fathom whether the global economic outlook justifies the rise in higher yielding currencies and assets. On Monday the dollar weakened as US unemployment data and the results of last weekend’s G 20 meeting prompted investors to speculate that US interest rates would remain at historic lows. The British pound fell sharply after Fitch’s Ratings said that the UK government was the most at risk of having its triple AAA rating lowered if the government engaged in new stimulus programs. Andrew Wilkinson of Interactive Brokers Group stated, “With many currencies reaching new highs recently, there is a reasonable amount of resistance toward a headlong lunge into fresh territory for now.”

German Investors Pessimistic

The euro vs. dollar fell 0.2% to $1.4957 just short of the $1.50 mark and against the yen the dollar was down 0.1% to 89.87 yen. The dollar index, DXY, rose 0.2% after hitting a fifteen month low on Monday. The euro was pressured by German ZEW results which showed that investors were more pessimistic than during the past four months. Concerns that investors have become overly optimistic pressured recent winners like the Aussie dollar which declined 0.3% against the US dollar to $0.9274.

Fed has Cautious Outlook For Recovery

US Federal Reserve officials struck a cautious note on Tuesday about US economic outlook. Disappointing economic data from the US points to a slow recovery and rates are expected to remain at near zero for an extended period. The Canadian dollar got a bit of good news as oil prices climbed above $80 a barrel. The Canadian dollar or ‘loonie’ rose to 95.26 US cents. Promises by the G 20 group of nations to keep stimulus measures in place also benefited the loonie. Mixed economic signals from the euro zone pressured the euro. Italy and France reported sharp falls in output while Germany reported a surge in production.