As skepticism continues about how effective Greece’s actions will be in dealing with its debt problems, the dollar rallied to gain an upper hand over the Euro after a long gap of 2 years. Not only that, it has recorded the highest gain per quarter as compared to the Euro in this period.
Euro countries are still threshing out the final plan which will help pull Greece back on its feet but no positive conclusion is imminent yet. Given the uncertainty in the situation, the general confidence in dollar is growing by leaps and bounds. Traditionally, the dollar has always grown stronger in face of uncertain Euro performance and vice versa.
Another boost for the US economy, which will strengthen the dollar, is that employment figures are believed to be improving steadily. As unemployment falls, the confidence in the economy will improve and optimism will return in the sustainability of the markets. This will lead to more external investors showing interest in participating in the economic activity in the country, giving a boost to the dollar.
The dollar has recorded a significant value improvement as seen by the change from $1.3530 a week ago to $1.3410 currently against the Euro. When adjusted for the quarter, a 6.8% growth was seen – the highest since September 2008.
Greece continues to be the most discussed issue on the agenda for the Euro nations. There is speculation that the International Monetary Fund may be called into play to bail out the debt stricken country. Other European countries like Portugal, Ireland, Italy, and Spain are also yet to show concrete signs of recovery from the recession.
Doubts still exist whether the Euro will be able to survive the recession unscathed and this is a major reason for the continued strengthening of the dollar. These doubts, paired with the slower economic improvement in the European nations as compared with the US are driving the dollar upwards, according to some analysts.
Reports show that the dollar has also gained as opposed to the Japanese yen leading to expectations that the Federal Reserve may hike interest rates soon. The Bank of Japan has not made any interest hike announcement as yet and the deflation plaguing the economy is not likely to permit this any time soon. Both the Australian and Canadian dollar also fell against the US dollar during this period, confirming an all round confidence in the US currency.
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