Dollar Soars
Posted on: Jun 16th, 2009 | By Doug Casey | Filed under US Dollar & Forex Trading
In the currency market, the dollar soared against the euro. Late Monday, the euro was trading at $1.378 vs. $1.4022 on Friday.
Marketwatch.com wrote that the buck “got a lift from dollar-friendly comments made by a Russian official and a weekend pledge by finance ministers from the Group of Eight nations to consider strategies for exiting the massive economic-stimulus measures they’ve undertaken before inflation threats emerge.”
Alexei Kudrin, Russia’s finance minister, told reporters Saturday on the sidelines of the G8 meeting in Italy that there was no near-term alternative to the U.S. dollar as the world’s leading reserve currency.
Thus, despite tomorrow’s closed-door BRIC meeting, Kudrin seemed to presage an effort by Russia, China and other major holders of dollar reserves to squash talk that could weaken the U.S. currency — and thereby the value of their reserves.
“Confirmation from Russia that the U.S. remains the world’s major reserve currency just one day ahead of the BRIC meeting acted as a catalyst for a market well long of euros,” said strategists at Brown Brothers Harriman.
Kudrin was not alone. In remarks prior to the G8 meeting, Japanese Finance Minister Kaoru Yosano expressed faith in U.S. Treasurys, while IMF Managing Director Dominique Strauss-Kahn said on Saturday that the dollar wasn’t weak and that he didn’t expect to see a drop in its value.
In sum, these remarks appeared to be part of a “concerted effort to not dollar bash,” said Daragh Maher, currency strategist at Calyon Bank.
Maher also noted that the lack of an agreement by the G8 to publish bank stress tests appeared to be putting added pressure on the euro. European officials seem willing to ignore calls by the U.S., Great Britain and Canada to provide more details about the health of the banking sector in the zone, he said.
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