The U.S dollar is leading the currency market leaving behind all the world currencies. The Euro which was making a big way earlier this month is at once silent in the foreign market. At the moment, it is the U.S dollar which is escalating. The dollar rose to almost seven weeks high against the Euro on speculation that the Fed may rethink about the inflation that has yet to be domesticated. Apart from showing its solidity to the Euro the dollar showed to the Yen too. The dollar rose to $1.294 per Euro yesterday making it the strongest since Nov’24. The Fed’s lending rate between the banks is at 5.25 since June and the BOJ’s key rate is 0.25% and the European Central Bank’s benchmark is 3.5%. So the traders are waiting for the Fed to meet next on January 31st’07 to lower the rates in March down from 100% last month.
Apart from all these, the trade deficit in U.S is a cause of worry. The trade deficit widened to $6o billion in November’06 when compared to $58.9 billion in the previous month (i.e October’06). The Head at the Foreign exchange trading at Sumitomo said that the people who have recently bought the U.S dollar may have to unwind their trades.
Hoping that people who bought the U.S dollar recently will be at positive stride.
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