Saturday, March 12, 2011

U.S. Dollar Drops Against Euro Again

The euro extended gains against the U.S. dollar on Friday after euro zone leaders came to an agreement on a competitiveness pact.

The euro hit $1.39 EUR=, up 0.8 percent on the day, according to Reuters data. Short covering played a major role in strengthening the euro zone single currency throughout the majority of the session, according to strategists.

The euro zone leaders reached a deal to establish higher retirement ages, more flexible labor markets and debt and deficit limits for euro zone countries.

The deal is expected to be officially adopted at a full 27-nation European Union summit on March 24-25.

Friday, March 4, 2011

U.S. Dollar to Continue to Fall in Value

The U.S. dollar is likely to fall in the week ahead as investors continue to bet that interest rates in the euro zone will rise ahead of those in the world's largest economy.

U.S. February jobs data came in a touch better than expected on Friday but disappointed investors who had hoped for an even stronger report. For details see

Investors see strong U.S. jobs growth as necessary for the Federal Reserve to end its second round of quantitative easing and instead tighten monetary policy by raising rates.

The U.S. situation is in sharp contrast with that of the euro zone, where the zone's common currency is likely to remain supported after European Central Bank President Jean-Claude Trichet strongly hinted at an interest rate rise in April, bolstering the view the ECB will tighten monetary policy before the Fed.

"We had Trichet warning Thursday that the ECB is considering a rate hike and perhaps the start of a rate hike cycle," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey. "The U.S. job number came in as expected and provided little direction to the market other than it did not disappoint and that will support risk appetite."

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