Lower crude oil prices and weak economic data from the Euro zone helped the U.S. Dollar rebound after the record one-day drop against the Euro.
Many investors are skeptical as to how quickly the Federal Government’s $700 billion bailout plan of financial institutions in the U.S. will be implemented, in order to restore confidence in the financial sector.
The primary reason for the U.S. Dollar recovery is the fact that based on the economic data from the Euro zone it appears that the economy in the Euro zone has basically come to a standstill. According to most analysts, the main worry of the currency market is the impact of the rescue plan on the economic and fiscal stability of the U.S.
In early trading in New York, the Euro fell by 0.3% to $1.4738 after dropping to a session low of $1.4682. The Euro was negatively affected by factory data which showed that manufacturing activity in the Euro zone had contracted at the fastest rate in over seven years.
While the drop in oil prices boosted the U.S. Dollar, the future direction of the greenback will depend largely on the testimonies by the U.S. Treasury Secretary and Federal Reserve Chairman on the bailout plan.