Dollar falls but prospects positive

Published: 12 Nov at 10 AM Tags: Euro, Dollar,

The dollar has fallen against the euro as investors look to lock in gains after a two day rise. However, analysts remain positive that the greenback will find support after strong US job figures made it more likely the Federal Reserve will scale back its huge bond buying programme sooner rather than later.

The dollar is also likely to benefit from the European Central Bank’s unexpected interest rate cut. However, it is the robust jobs report that has everyone betting on the Fed cutting its stimulus policy before the year is out. If this happens there will be fewer dollars in the system, which will give strength to the US currency.

The euro pulled back slightly after hitting a two-month trough last Thursday of $1.3295 following the ECB’s rate decision. The single currency is currently trading at 1.3416. The dollar is up 0.1 per cent against the yen at 99.19 yen.

The US jobs statistics came as a surprise because the Washington government had partly shutdown for a period of 16 days. This indicates that the US economy could well be stronger than most analysts have predicted.

The situation in Europe is likely to see the dollar make further gains against the euro which could drop to $1.32.