US Dollar Under Pressure, Euro Strengthens

In the currency markets, the dollar exchange rate was under pressure until Friday due to uncertainty regarding the reduction of stimulus monetary measures by the US central bank.

The euro exchange rate against the US currency rose by 0.45 percent last week, to 1.3340 dollars, and on Thursday, for the first time in seven weeks, it broke above the level of 1.3400 dollars.

In contrast, against the Japanese currency, the price of the euro fell by 2.3 percent, to 128.35 yen.

The dollar also weakened against the Japanese currency, with its exchange rate dropping by 2.7 percent, to 96.25 yen, and on Thursday, for the first time in seven weeks, it dipped below the level of 96 yen.

The American currency was under pressure until Friday, as several weaker-than-expected economic data from the US created uncertainty about when the Fed would reduce stimulus monetary measures.

The euro, on the other hand, was on the rise thanks to better-than-expected data from Germany, which fueled hopes that the strengthening of the largest economy in the eurozone could pull the bloc out of recession.

As a result, by mid-week, the dollar index, which shows the value of the US dollar against six major world currencies, slipped to just 80.868 points, the lowest level since mid-June.

However, on Friday it recovered, reaching 81.240 points, after a number of officials from the US central bank indicated that the Fed would likely begin to reduce its purchases of government and mortgage bonds in September if the economic situation continues to improve.

This means that the Fed would be the first of the major central banks in the world to start reducing economic stimulus, while a longer period of loose monetary policy can be expected in the eurozone and Japan.

“The market was calm last week, typical for the summer period, and volatility decreased. Next week, several significant data from the US economy will be released, including retail sales. If these data are good, the dollar should strengthen,” says Kiran Kowshik, a strategist at BNP Paribas.