Dollar Gains as Service Industries Expand

The US dollar gained today, reversing its downward trend that was in place for past several days, after the set of the good economic data from the US was released, including the report about the service industries.

The economic activity in the non-manufacturing sector grew in January for the 14th consecutive month, causing
Non-Manufacturing ISM index to climb from 57.1 to 59.4, while a gain to only 57.2 was expected by the specialists. The factory orders increased by 0.2 percent in December, following the 1.3 percent increase in November. The number of claims for unemployment benefits dropped from 457,000 to 415,000 last week.

Federal Reserve Chairman Ben Bernanke spoke today about the problems that the US economy may face. He said in his speech:

In sum, although economic growth will probably increase this year, we expect the unemployment rate to remain stubbornly above, and inflation to remain persistently below, the levels that Federal Reserve policymakers have judged to be consistent over the longer term with our mandate from the Congress to foster maximum employment and price stability.

Despite potential obstacles to the economic recovery, Bernanke suggested that the Fed may raise the interest rates if it’ll be necessary. The probability of an interest rates increase played in favor of the dollar, especially in light of words of European Central Bank’s President
Jean-Claude Trichet that suggested about a long period of unchanging interest rates.

EUR/USD dropped from 1.3808 to 1.3621 as of 23:34 GMT today. GBP/USD slid from 1.6189 to 1.6132 after it reached the intraday high of 1.6277. USD/JPY traded near 81.66 after opening at 81.55 an jumping to 82.05.

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