Euro surges to a 6-week High against U.S. Dollar

The Euro hit a 6-week high against the U.S. Dollar today as investors are pondering whether the projected restricted demand for the Greenback would materialize by the year-end.  Analysts, such as Adam Cole of London-based RBC Capital Markets, believes that although there was originally a strong consensus that U.S. Dollar requirements would push the currency higher toward year’s end, that doesn’t appear to be materializing. 

Although the Swiss National Bank cut it interest rate by 50 basis points, its impact was not felt because, last week, other central banks reduced their interest rates by a larger percentage points.  Investors were expecting the bigger European Central banks to cut interest rates, however, comments by Juergen Stark, Executive Board member that the central banks do not have enough room to reduce interest rates further, and that any future reduction in interest rates will be in small steps.  Consequently, investors’ expectations cooled off.

Dealers have also cited technical thrusts in favor of the Euro, having exceeded $1.30, while currency markets were watching with keen eyes the bailout plan for the financially strapped American auto sector.

On December 10, 2008 by 09:24 GMT, the Euro rose by 0.8% and traded at $1.3113, after hitting $1.3158, a 6-week high, during an earlier global session.  The U.S. Dollar fell by 0.7% against a group of currencies and traded at 84.829 .DXY.  It also fell by 0.4% versus the Japanese Yen and traded at 92.25 Yen.