Friday, 16 Oct 2009

Dollar index Headed for Second Weekly Loss

The Dollar has experienced a volatile trading day today as further mixed economic data continued to be published throughout the day. The U.S. Dollar advanced versus the EUR and Japanese Yen today as data showed gains in foreign funds flowing to the U.S. and a weaker than expected consumer confidence report encouraged investors to sell stocks. The EUR traded at $1.4899 versus the Dollar, down from $1.4933 after failing to breach the psychologically important $1.50 level. The Dollar traded at 91.01 Yen, up from 90.59 Yen.

Reducing the attractiveness of equities and supporting the Dollar, a report showed U.S. consumer sentiment pulled back more than anticipated this month. The University of Michigan/Reuters index fell to 69.4 in early October from 73.5 in September, a much steeper decline than expected. This follows yesterday's report that showed U.S. industrial production jumped 0.7% last month, exceeding expectations. These mixed signals illustrate the recent uncertainty over the sustainability of the growth and economic recovery.

Overall, the Dollar index is still headed towards a second weekly loss, sliding 1% from last Friday. The Yen has seen a roughly 1% increase since last Friday while the EUR is still up about 1.4% versus the Dollar this week.

Looking ahead to next week, Ben Bernanke's testimony will likely set the direction for the Dollar for the coming week.