The dollar exchange rate on Tuesday slightly fluctuated against other major international currencies in global stock markets as investors await the outcome of the U.S. monetary lawmakers’ meeting.
The dollar has hardly changed against the euro, which stands at 1.3803 dollars. Against the yen, it weakened by 0.1 percent, standing at 118.7 yen. The euro exchange rate, on the other hand, has slightly fluctuated against the yen, standing at 163.85 yen. Investor aversion to risk, fueled by deepening problems in the U.S. mortgage market, remains one of the main themes in the foreign exchange market. This is precisely why the yen, a low-yield currency, is currently strengthening against the dollar. Specifically, the so-called carry trades, where loans are taken in cheap yen to purchase higher-yielding currencies, have faltered.
Generally speaking, the dollar has entered calmer waters after receiving a boost from the recovery of stock prices on Wall Street on Monday, and the strengthening of prices this morning on European exchanges. The jump in the value of the New York Dow Jones by two percent on Monday eased investor concerns about worsening credit conditions. Analysts expect that the U.S. central bank, the Fed, in its meeting on Tuesday, after deciding to maintain the key interest rate at 5.25 percent, will mention recent turbulence in the financial markets in its statement.
“Stock markets are currently strengthening and this will continue. Last night’s strong recovery on Wall Street helped calm the foreign exchange markets ahead of the Fed meeting,” assessed the market sentiment Mitul Kotecha, head of research at Calyon.
“No one expects the Fed to change interest rates, but its statement will be really very important. It seems that it may still focus on curbing inflation, but the markets will be looking for some statements regarding the situation with the credit market debacle,” added Kotecha. (H)
