Dollar and Yen Fall against Major Peers

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The dollar, along with the yen, went in for a weekly loss with data showing that the European economy was on the path to recovering. It was accompanied by a drop in refuge asset demand. Against the euro, the dollar dropped to a 2 week low. Late in the week, the euro gained. The key reason behind this was the sale of bonds by France and Spain at low yields.

Standard and Poor Changes AAA Rating of France and Spain

The sale of long and medium term debt was low, as a result of Standard and Poor downgrading the counties. France lost its AAA rating and Spain, was brought down to just AA. The latest sale of Spain and France bonds brought 14.6 billion Euros. Along side, Greece has been in discussion for a debt-swap plan with creditors (private). The selling of the yen and dollar are a result of positive risk sentiments which stem from good economic figures in the US. Positions are being adjusted by investors.

US Existing Home Sales Increase, Unemployment Claims Decrease

In the US, the buying of existing homes increased 5.2% a few weeks ago. It hit an annual pace of 4.65 million. This was the highest since 2010, May. Recently released data indicated that claims of being unemployed, by Americans, dropped to the lowest since 2008 in April. There has also been a rise in factory output the past month. The annual rate of gross domestic product in the US increased by 3% in the last quarter. This is high when compared to the 1.8% gain in the quarter before that. The 3% is the biggest increase since the 4th quarter in 2010.

Equity prices will increase with US numbers gaining strength. There is a good possibility that the markets will continue the present trend of being ‘risk on’. This can accelerate the purchase of the euro. According to Bloomberg’s Correlation Weighted Indexes, in the past few days, the euro has gained by 0.8%. The yen has dropped 2% while the dollar fell by 1.8%. Among the ten currencies that the gauges track, the yen has performed the worst in the recent past.

 

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