Demand for euro ahead of Fed announcement

Published: 19 Jun at 9 AM Tags: Euro, Dollar,

The eyes of investors in money markets around the globe are firmly fixed on the US Federal Reserve at the moment. The central bank’s chairman, Ben Bernanke, is due to make an announcement that could spell the premature drawing in of easy money that has been used to stimulate the world’s largest economy. However the Fed is yet to give any indication of whether quantitative easing will be pulled back before the end of the year.

The anticipation saw the dollar strengthen slightly against the yen, but lose out to the euro. The emerging markets appear to particularly nervous because a slowdown in stimulus in the US is likely to affect them the most.

Across Asia currencies apart from the yen and yuan have been having a rough time. Indonesia surprised analysts last week by announcing that it would be pushing up interest rates.

The Australian dollar has lost 15 per cent against the euro since April and is still suffering. The single currency was most recently up 0.8 per cent to hit A$1.4109. The Aussie has also lost around 10 per cent against its US counterpart since April and is trading at $0.9465.

The Reserve Bank of Australia has welcomed the drop as it means the country’s export sector is becoming more competitive.