Forex News and Rumors – Afternoon Update

Growing Optimism Pulls Down Dollar

Stronger economic news and the re-appointment of Ben Bernanke to the Chair of the Federal Reserve, boosted investor confidence today, prompting many to sell dollars in favor of euros. Traditionally, the dollar is seen as a “safe-haven” destination in which to park money during times of uncertainty, but if growth is returning to the economy, investors often abandon the dollar in favor of higher-yielding securities and instruments such as the euro. More

US Housing Prices, Consumer Confidence Beat Expectations

US house prices climbed for the second straight month while consumer confidence rose to an index reading of 54.1 in August, compared to 47.4 in July. Despite the positive results, economists warned that we are not yet out of the woods.

“Confidence remains well below its historical average of 95 and it has not even regained the level of 61 seen before the collapse of Lehman almost a year ago,” said Paul Dales, U.S. economist at Capital Economics in Toronto. More

After Failing to Break $75, Oil Sheds $3

Crude oil lost more than 4 percent today after failing to break through the $75 a barrel mark earlier in the day, falling to $71.44 a barrel at 1:38 p.m. on the New York Mercantile Exchange. The contract touched $71.35, the lowest level since Aug. 20. Oil has risen 60 percent this year.

“We’ve had a brisk rally in the petroleum markets over the past couple of sessions, and we’ve seen the dollar weaken, so the crude oil market’s inability to step up to a higher level with that kind of background support makes the crude market appear to be heavy,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. More

Bank of Canada Says Canada to Emerge From Recession But Threatened By Rise in Loonie

The Bank of Canada said today that Canada will likely emerge from recession next quarter and will experience slight positive growth. However, Timothy Lane – the Bank’s deputy governor – is worried that a strengthening loonie (the nickname for the Canadian dollar) could derail the recovery. It is expected that the Bank of Canada will intervene if it believes an appreciating dollar could lead to fewer exports – in particular to the United States – where a more valuable loonie could make Canadian products more expensive for American buyers. More

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