Dollar at Three Month High vs. Yen
The US dollar advanced to its first monthly gain since June 2009 as government reports show that job losses are ‘abating.’ Despite the year end rally the dollar is down 4.2% for the year. The dollar hit a three month high vs. the Japanese yen and advanced against the euro on positive US economic data that showed signs of recovery. Money manager Thanos Papasavvas said, “We are seeing the dollar recover probably into the first quarter of next year. We would expect the unemployment rate to start to stabilize.” The Dollar Index which tracks the dollar against a basket of six major currencies rose 4% in December to 77.860, the largest gain since January 2009 and the first monthly gain in six months.
IMF Reports Dollar’s Reserve Shares Declining
International Monetary Fund reported on Dec. 30 that the dollar’s share of reserves held by central banks fell to 61.6% the lowest on record down from 71% ten years ago. The euro’s share of foreign reserves rose from 17.9% to 27.7%. Tom Fitzpatrick of Citigroup Inc. in New York offered a somewhat pessimistic assessment of the dollar, “You might get periodic episodes of a little bit of dollar strength. But we really don’t feel any of the underlying parameters for dollar weakness has changed that much.” The yen was the only major currency to fall against the dollar on the year on speculation that the Fed will withdraw stimulus measures sooner than expected. David Tien of Francis Trees & Watts stated, “The surge in growth can continue for a while. The key question is against which currency the dollar’s gain can be the most pronounced. We think it’s the yen.”
Pound Posts Annual Gains vs. Dollar
The pound posted annual gains against the euro and the dollar as economic data showed the UK emerging from the recession. The pound pared second half advances after the Bank of England bolstered its quantitative-easing program, a debt-buying plan, to 200 billion pounds. ($324 billion USD) Most analysts expect the pound to strengthen in 2010.
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