Dollar Confirms Another Weekly Gain on EU Crisis

The U.S. currency is heading to post the highest quarterly gains versus the euro as raising budget deficits among Eurozone members is producing a capital exodus from the region towards safer markets overseas, affecting also risk driven markets negatively.

Despite the fact a French-German bailout plan for Greece was unveiled towards the end of this week, the EU couldn’t revert a strong negative sentiment towards assets in the region, specially after Portugal has started to hit the headlines after it credit was downgraded by Fitch Ratings, which was expected to an extent, but the actual fact weighed on the currency’s outlook anyways. The delay among government officials in Europe and the lack of efficiency to deal with the budget gap issues is making the euro one of the most unattractive currencies in the beginning of 2010 before the end of the year’s first quarter next week, which allowed the dollar to perform well for another week versus the bloc’s single currency.

Eurozone members budget deficit is certainly affect the euro’s rate, but it’s important to remember, that several of its main trading partner, as the U.S. and U.K., have also growing budget deficits, and the consequent problems in these regions may allow the euro to pare some of its losses at some point this year, specially versus the dollar, as U.S. budget deficit concerns may rise in the following months.

EUR/USD closed at 1.3408 from an opening rate of 1.3524 in the beginning of the week.

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