Will the G7 Rescue the U.S. Dollar?
During the G7 meeting in Washington yesterday investors were under the impression that group will intervene in the foreign exchange market to stabilize the U.S. Dollar. However, shortly after the meeting it became clear on Monday, April 14, 2008 that no concerted effort would be taken by the G7 to prop up the U.S. Dollar, and as a result investors moved out of the Dollar and into other currencies.
In early trading in Sydney on Tuesday, April 15, 2008, the U.S. Dollar traded slightly higher at 10:15 am (00:15 GMT) the U.S. Dollar traded at 101.16 Yen compared to 101.08 Yen traded late on Monday in New York, while the Euro traded at $1.5816 compared to $1.5825. Investors believe that the overnight gain in the U.S. Dollar will not be short lived if the G7 fails to intervene in the market.
According to traders, sovereign funds, especially those from the Middle East Central banks have been actively buying the Euro in London trading, thus sending the Euro higher against the U.S. dollar.
The Japanese yen continues to be a safe haven currency for most investors. In overnight trading, the Japanese yen gained against the U.S. Dollar after Wachovia, the U.S. 4th largest bank, announced losses for the last quarter and will be seeking capital infusion of about $7 billion from the sale of stock. However, better than expected March retail sales in the United States helped push the U.S. Dollar over the 101.00 Yen level.