Euro vs. Dollar — Biggest Drop In 8 Years
Kurt Brouwer August 8th, 2008
Source: Wikipedia Commons
Yesterday, the head of the European Central Bank announced that the economy in Europe was softening. As a result, the Euro fell and it has fallen further today because the weakening European economy makes it increasingly unlikely the central bank will raise short-term interest rates. And, as regular readers know, the differential between short-term rates in the U.S. and Europe is the factor that I believe most closely correlates with currency movements (How Far Has the Dollar Fallen? And Why? — What’s Next?).
This piece from Bloomberg points out that the Euro is falling versus the dollar [emphasis added]:
Euro Falls the Most in 8 Years on Reduced Bets for Higher Rate (Bloomberg, August 8, 2008, Ye Xie and Anchalee Worrachate)
The euro fell the most in almost eight years, pushing the currency to a six-month low against the U.S. dollar, as traders pared bets the European Central Bank will raise interest rates as the economy slows.
The euro dropped below $1.50 for the first time since February after ECB President Jean-Claude Trichet yesterday said economic growth will be “particularly weak” through the third quarter. An index that tracks the dollar against the currencies of six U.S. trading partners touched the highest since February.
…”We are now seeing a lot more negative surprises coming out of Europe than from the U.S., more so than any time during this credit shock,” said Jim McCormick, head of currency strategy at Lehman Brothers Holdings Inc. in London. “At the same time, you’ve got some pretty strong capital inflows to the U.S. We kind of have the perfect circle of fundamentals bumping into strong technicals.”
Europe’s shared currency declined 2 percent to $1.5010 at 3:33 p.m. in New York and reached $1.499, the lowest level since Feb. 26, from $1.5325 yesterday. It fell as much as 2.13 percent, the biggest one-day drop since Sept. 6, 2000, the largest decline since the 1999 introduction of the euro.
Against the yen, the European currency traded at 165.46, from 167.70. The dollar rose 0.7 percent to 110.23 yen after touching 110.36, the strongest since Jan. 2.
…The European currency has declined 3.6 percent against the dollar in its fourth weekly decline, the worst losing streak since May 2007. Against the yen, the U.S. currency has advanced 2.3 percent, heading for its biggest weekly gain in almost two months…
For more on this trend, see The U.S. Dollar — Is The Tide Turning? and Gross Likes Dollar vs. Euro For First Time.
Source: Wikipedia Commons
- Economy , Geopolitics , Investing , Money
- Comments(1)
Did you enjoy this article?
it was an amazing day, very very very exciting, the sad part is that a lot of people i know lost 75% or more of their trading accounts in the past 24 hours
but i think the technicals were extremely obvious , a break of 1.5520 on Tuesday left me expecting 1.5282 then 1.5014
today’s rates did not surprised me at all , its only the speed of this fall that did !
if there is any one who could tell me exactly since what day is today the biggest drop, and what is the hi & lo , and close on that day? if any one can help me with this info i would really be thankful
PS: no fundamentals explain more than 5 cents of drop in the EUR in less than 36 hours , stick to the technicals !