Forex broker experts saw the euro rise to its highest point in almost four months versus the dollar amid important financial developments on both sides of the Atlantic.
Tomorrow, the Federal Reserve starts a two-day meeting where the bond-buying strategy to boost the economy in a third round of Quantitative Easing will hold central attention among market investors.
According to a Bloomberg survey among 54 top economists, The Fed will keep their key interest rate at 0.25 percent.
“The dollar will remain weak if the Fed expands its balance sheet”, said Chris Weston, an institutional dealer at IG Markets in Melbourne. “I would be looking to sell any kind of big rallies in the dollar”.
The forex broker market also took notice of the Moody’s Investors Service release, in which a downgrade on the American grade to AA1 could take effect if “budget negotiations for the legislative period of 2013 can’t produce specific policies that could generate the stabilization of the public debt against the GDP”.
The Dollar Index, which Intercontinental Exchange Inc. (ICE) uses to track the greenback against the currencies of six U.S trading partners, declined 0.3 percent to 80.184 after touching 80.122, the lowest since May 10. The dollar has lost 1.3 percent in the past week, the worst performance among 10 developed-nation currencies, while the euro strengthened 0.6 percent, the second biggest advancer after the New Zealand dollar.
In effect, the forex broker session saw euro rise after Germany’s top constitutional court said it will proceed with a ruling on the country’s role in the European Stability Mechanism (ESM) bailout fund.
“The market is anticipating the German Constitutional Court will approve the ESM”, said Yoshitsugu Fujita, assistant Vice President of global markets in New York at Sumitomo Mitsui Trust Bank Ltd. “If it actually passes, the euro may rally”, concluded Fujita.
Forex broker reports witnessed a 0.4 percent rise in the common currency to $1.2810 at 9:02 a.m. New York time. It earlier touched $1.2819, the highest since May 22. The euro dropped 0.2 percent to 99.73 yen. The dollar slipped 0.6 percent to 77.84 yen, touching the weakest since June 1.
Canada’s dollar also strengthened for a fourth day against the USD, climbing to a 13-month high on optimism on global growth.
The important thing for the Canadian dollar is that central-bank policy has removed tail risk and crushed volatility”, said Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto. “The dollar has a bias today to be higher and it’s a hard trend to fight”.