US Dollar Holds Steady despite Missile Test

The surface to surface missile test by Iran did not significantly impact the U.S. Currency as expected by analysts, due to the tension sin the region.

The Euro edged higher to $1.5723 compared to $1.5748, while the U.S. Dollar dropped just above 107 Yen, compared to 107.53 earlier.

According to some analysts, the missile tests may dampen hopes that crude oil prices will continue to slide, which helped support U.S. Dollar sentiment.   Risk sentiment has broadly increased recently, with the most obvious move coming from oil, which, prior to the Iranian news, had dropped below $137 per barrel.  Since there is a strong negative correlation between the price of oil and the strength of the U.S. Dollar, most analysts are speculating that the price of crude oil may have peaked.

According to the Federal Reserve chairman, the Fed is closely monitoring developments in the financial markets and are considering many options, including permitted facilities for primary dealers to be extended beyond December 2008, should the need arise.

European Central Bank decision last week to increase interests rates from 4% to 4.25% will help in maintaining price stability.  It also shows that the ECB is determined to curb inflation.