GM Bankruptcy Causes Concerns
The yen to dollar exchange rate rose for a second day and also gained vs. the euro after the US government announced that General Motors will file for bankruptcy. The Japanese yen maintains its status as a safe haven currency as some currency experts are beginning to question the US dollar’s safe haven status. The Japanese yen rose against 13 of the 16 most traded currencies in global forex markets. Many traders see the announcement by GM to close 11 factories as a sign that the US recession is far from over.
ECB May Plan More Quantitative Easing
The euro to pound rate fell on concerns that the European Central Bank will announce plans for more quantitative easing at their June 4th meeting. The dollar index declined the most in three weeks as investors remain concerned that the US government will own a 60% stake in a bankrupt company. The Obama administration issued a statement that said the government is “a reluctant equity owner,” of GM. Currency exchange rates have been greatly affected by concerns about mounting US debt. Susumu Kato of Calyon Securities stated, “The trend is for a decline in the dollar on the deteriorating quality of U.S. government debt.”
Dollar Sell Off
The euro to dollar exchange rate gained 0.2% trading at $ 1.4178 after reaching a high of $ 1.4246, the highest since December. The pound to dollar rate rose to a seven month high of $ 1.6436. Other winners were the Aussie and Kiwi dollars which traded at $ 0.8137 and $ 0.6520 respectively. Brian Dolan of Forex.com said, “This is a market that is in the process of selling the dollar against everything, buying commodities, and that should continue today. The move has taken on something of a self-fulfilling quality to it now.”
Currency exchange rates for the US dollar are being driven by the perception that the worst of the recession is over and investor concerns about mounting US debt. Barring an exceptional event the rest of the week does not look good for the greenback.
Jeff Davis is an expert financial writer and specializes in the Forex Market and currency trading. You can find his recent articles at: http://www.forexopportunity.org