US Dollar Makes Some Gains

There appears to be a subtle but positive shift for the US Dollar vis-a-vis the Euro and other benchmark currencies recently.  After toying with a new record low in the $1.60-1.61 range against the euro, the dollar rebounded impressively in the last week.  As of this moment, the mid-market rate sits at $1.558.

Contributing to the dollar’s renewed strength is the remarkable decline in oil prices in the last two weeks, due to rapidly increasing inventories and a short term diminishing of global demand because of weak economies around the world.  Couple that with some better than expected economic news on the home front, and signs of continued inflationary problems abroad, and the US dollar signaled that it wasn’t Charmin’s equivalent of currency just yet.

For currency traders, the dollar/euro ratio has been “range bound” for the last month or two, trading narrowly in the 1.56-1.63 range.  But an important charting threshhold was passed late last week, when the euro dipped below it’s 100 day average.  This can often be a precursor of a long term trend, namely a weaker euro.  Traders are now talking of a new floor for the exchange rate of 1.53, should the dollar strengthen to 1.555 or more.

All of this is good news for US buyers and travelers heading to Europe.  While the situation remains highly volatile, and the dollar could weaken again with only the slightest of bad news, at least there is now hope that the movement is not a one way street into oblivion.

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