Tuesday, July 21, 2009

Wall Street Rally Brings Dollar Decline

The US currency reached its month low against its major counterparts such as the Euro, as Wall Street rallied on Monday. CIT managers approved a $3 billion rescue package resulting into a strong rally in the stock market.
Risk appetite of traders was increased due to continued optimism from the financial reports of the banks for 2Q. U.S. housing data issued yesterday suggests stabilization of the U.S. housing sector.
The Dollar Index hit 78.799 on Monday, the lowest level since the 3rd of June. The greenback declined against the JPY by over 70 pips to 93.92, because traders left the dollar for higher profitable assets. The GBP/USD rose by 120 pips to 1.6518, as the GBP acted positively to the optimism in the banking sector. The EUR/USD closed nearly 60 pips higher at 1.4214. There are some grounds to assume that probable rise in equity prices would bring further dollar depreciation.
As for today, some important releases are to be issued both in the USA and Canada. Canada is set to publish both the BOC Rate Statement and Overnight Rate at 13:00 GMT. The results of these are set to determine the USD/CAD rate in the coming week. At 14:00 GMT, U.S. Federal Reserve Chairman Ben Bernanke will testify before the Financial Services Committee in Washington, DC. This is important for further U.S. monetary policy. The forex market is expected to experience heavy volatility.

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