The reduction of interest rates in Europe and Barack Obama’s victory in the presidential elections in the USA spurred the rise of the dollar exchange rate in the middle of last week, but bad news from the American economy brought it down at the end of the week.
Thus, the euro exchange rate against the dollar remained almost unchanged. It slightly increased from 1.2750 to 1.2760 dollars. The price of the dollar also fell against the Japanese currency, from 98.5 to 98.3 yen. The Japanese currency slightly strengthened against the euro, causing the exchange rate of the European currency to drop from 125.5 to 125.3 yen. Barack Obama’s victory in the presidential elections prompted the strengthening of the dollar on Tuesday as investors hope that the new American government will do more to revive the economy next year than Bush’s administration did.
"The result of the American presidential elections undoubtedly provided support to the dollar," concluded Gary Thomson from CMC Markets, interpreting that the rise of the greenback rests on the quick announcement of results. The reduction of interest rates in Britain and the eurozone on Thursday also positively impacted the American currency. The Bank of England cut the key interest rate by as much as 1.5 percentage points to 3 percent, which was a major surprise, given that analysts expected a reduction of half to at most one percentage point. The European Central Bank, as well as the Swiss National Bank, reduced rates by 0.5 percentage points, so the ECB’s key rate now stands at 3.25 percent. This caused the euro and the British pound to weaken. Thus, the pound exchange rate sharply fell to 1.5722 dollars, from a level of 1.5860 dollars recorded just before the announcement of the decision. Its slide proved to be short-lived, and the pound soon recovered those losses.
