Dollar Gains on Negative Risk Sentiment & Good US Fundamentals

  May 22nd, 2012 at 21:51, Vladimir Vyun

US dollar banknotes and coinsThe US dollar advanced today on fears of the worsening crisis in Europe that drove investors to safer currencies and the dollar in particular as the US economy continue to show signs of recovery.

Traders are worried by decline of Italy’s economy and speculation that Spain may be the next country to ask for a bailout. There was no major news from Europe recently, and that is not good as without a significant positive event the situation in the eurozone would worsen, not improve. It is not surprising that demand for safe currencies was strong. The greenback even managed to outperform the yen, another currency considered to be a safe haven, but many analysts believe that the US currency would not gain on Japan’s one for long.

Fundamentals in the United States are not perfect, but definitely better than in the European Union. Existing home sales climbed to 4.62 million in April from 4.47 million in March. The manufacturing index of the Federal Reserve Bank of Richmond slid to 4 in May from 14 in April, much more that was predicted, but the figure above 0 shows that the industry continues to expand, albeit with slower pace.

EUR/USD sank from 1.2815 to 1.2684 and GBP/USD dropped from 1.5827 to 1.5765 as of 21:51 GMT today. USD/JPY edged up from 79.29 to 79.96.

If you have any questions, comments or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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