US dollar and risk

[Femi]

The US dollar performed last months the function of secure currency.

As usual when the risk aversion increased in the market, the greenback was asked and the exchange course of EUR/USD fell. Is it quite doubtful, if this tendency would go on in this year. Lots of experts wait for a strong rising dynamics in the U.S. and in the euro zone as well and expect dollar advance from it.

New credit problems in the U.S.

It is said that the US credit market continues to be fragile. The industrial real estate market is always focused and considered as “key trouble spot” by US central bank governor himself. Refusal quote of credit for offices, shopping centres and hotels rose at the highest level in 16 years and is likely to reach its high point first in 2011. If the credit problems becomes more sensitive again, the dollar would come under selling pressure. In the middle term, dollar depreciation risk would be big. In the short term, correction in EUR/USD is likely to go on.

www.ifcmarkets.com

[Pinalli]

You are right! The US Dollar gained across the board on Tuesday in advance of the conclusion of the two day Federal Reserve meeting later on today. The Fed has been emphatic in their insistence that interest rates will remain at the near zero level for some time to come, however a recent flow of data pointing to inflationary trends has traders hoping for a policy shift. There is no expectation that the Fed will move rates at this meeting, though what is being looked for is some hint or signal that a rate hike will come sooner than Fed members have recently said. The latest piece of data that indicates inflation might be on the rise was the Producer Price Index, which rose 1.8% in November, the largest increase in three months. Analysts are predicting that with the stronger unemployment and consumer spending data, the Fed will find it difficult to remain firm in their resolve to keep rates as they are. Not raising them might be more damaging if inflation does indeed kick in.