Iranian Troops in Iraq
The dollar gained yet again against the euro which has been pressured by two Greed sovereign debt downgrades and Austrian banking concerns. The dollar rose on safe haven bids after new reports said that 11 Iranian troops had entered Iraq and raised the Iranian flag over a disputed oil field. Initially Iraq’s deputy interior minister Ahmed Ali al-Khafa denied the reports but said later that there had been a series of incursions by Iran. He said he would seek a diplomatic solution rather than a military one. The Swiss Franc which is considered a safe haven currency rose on rumors of a coup in Pakistan. John McCarthy of ING Capital Markets stated, “It’s Greece, it’s Pakistan and certainly Iran has been one of the factors helping to support the dollar.” The euro hit its lowest since March against the troubled euro.
Pakistan Coup Rumors Trigger Safe Haven Flight
The Japanese yen rose against the euro and the Aussie dollar as the news from Pakistan sent a chain reaction through markets. The currencies later recovered most losses but the euro was down 0.4% against the Swiss franc trading at 1.49571CHF. Tomohiro Nishida of Chuo Mitsui Trust and Banking Company said, “The euro/Swiss was just at the key point on the charts and a rumor about Pakistan seemed to have pushed down the pair. Stops below 1.50 francs accelerated falls in a market with low liquidity and spurred risk avoiding trade at the year-end.” The euro was also down 0.4% against the yen to 128.43 and the Aussie fell 0.5% vs. the yen trading at 9.40 yen.
Dollar to Hold Recent Gains
Most currency experts predict that the US dollar will hold onto last weeks gains. The dollar continues to be supported by evidence of US recovery and the Fed’s decision to withdraw emergency measures in February 2010. Nick Bennenbroek of Wells Fargo stated, “We see the U.S. economy continuing to recover and monetary policy settings starting to move back to normal. Although our economics team does not expect actual rate tightening to take place until late in 2010, the withdrawal of non-conventional measures could start tipping the scales in the dollar’s favor.”
