Daily Analysis: USD index Climbs to a Two Month High

Forexminute Representative

USD peaks due to investment inflows

The dollar reached a two month peak on Friday as it gained due to the inflows of investment to the U.S. dollar as it proves to be a safe haven in comparison to the other economically weaker currencies. The European debt crisis and the financial woes that the U.S. is expected to face has led to the gain in the dollar. The index was up at 81.261 which is a 0.2 percent increase from its previous levels accounting from the 6th of September. The euro was down by 0.3 percent at $1.2735 while the dollar remained placid against the yen at 81.15 yen having gained about 2.1 percent last week.


Euro debt rising shrinking the euro zone economy

The Eurozone's crisis had stopped perturbing the traders at present but the situation might not get better unless there are significant improvements in the economy. The improvement in this weakened state will take a while. The economy of the seventeen countries that utilize the euro has declined for two quarters that normally defines a recession. There isn’t growth expected till 2014. The lack of growth would mean deficiency of tax revenue to aid the countries like Greece, Italy, Spain and Portugal to minimize their deficits and put brakes on the ever rising debts. The burdens of debt in comparison of the economic output show negative signs and are deteriorating every day. The combined debts amount up to 93 percent of the total gross domestic product of the euro zone.


Japanese yen weakens on expectations of Parliament to dissolve

The yen did fall under the political burden of the country. The sudden news of the Parliament facing the risk of dissolving has led to this sudden fall. The parliamentary deadlock had led to the announcement by Prime Minister Yoshihiko Noda to conduct elections next month. There is a general consensus that the current Prime Minister will lose and Japan will get a new leader. The Democratic leader Shinzo Abe intends to change the Japanese monetary policy to increase the inflation levels to reduce the value of Japanese currency and hence encourage the exports. The expectations of infinite printing of the yen made the yen fall by 2.5 percent last week. As of Friday the yen spanned at 1.23 cents per yen.

Crude Oil

Crude futures hold steady

Crude oil levels stay steady as seen on Friday due to the combined factors of a weak economic view of the buying nations and heightened risks of supply disruption from the Middle East. The increasing conflict between the Israelis and the Palestinians is gradually increasing disruption risks. The traders are also holding back investments due to the imminent fiscal cliff in the U.S. The resuming of operations from the North Sea Buzzard oil field after maintenance has improved the state of oil supply. Sweet crude futures were trading at $85.38 a barrel which is $0.07 down and the Brent futures rose $0.13 to $108.14 a barrel.

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