Greenspan comments spur on dollar rally

The US dollar was up in relation to a number of currencies on Monday.

It was especially helped by last week’s comments from US Federal Reserve chairman Alan Greenspan and solid economic data that indicates there will be as many as three more interest rate hikes in the US by the end of the year that will take interest rates to 3.75 percent.

On the other hand, bad political and economic news in the eurozone are leading to expectations of an interest rate cut by the European Central Bank by the end of the year.

US currency was up 0.6 percent to $1.2937 in relation to the euro, a nine-month high.

The dollar has gained 10.7 percent on the euro since March. It was also up against sterling, gaining 0.5 percent to $1.8020, while rising 0.9 percent to ¥109.58 in relation to the yen and rising 0.6 percent to SFr1.2768 against the Swiss franc.

Additionally, the South Korean won lost 0.8 percent in relation to the dollar, to Won1,016. The Swedish krona lost 0.6 percent in relation to the euro, to SKr9.2828, a fourteen month low, as well as declining 0.7 percent in relation to Norwegian currency.

These declines are in consequence of discussions of a rate cut, predicted to go down by 50 basis points to 1.5 percent next week, by Riksbank.

The yen, besides losing value in relation to the US dollar, also fell 0.6 percent to ¥83.29 against the Australian dollar.

The yen’s problems have been exacerbated by soft inflation data from China, which is generally seen as reducing the pressure on China to revalue its currency.

Discuss this in the Finance Markets forums

Story link: Greenspan comments spur on dollar rally