US Dollar Index Rises on European Uncertainty

Uncertainty about what’s next for the eurozone is prompting gains for the US dollar today, with the dollar index moving higher, heading for the 80 level. Concerns about the eurozone once again dominate, and the US dollar is moving higher as a result.

Earlier, the ECB began a three-year lending program for banks in the eurozone. The program is designed to keep the credit markets liquid during this time, so that interbank lending remains strong. However, the 489 billion euros borrowed by 500 banks exceeded the 310 billion expected demand. As a result, there are concerns that problems in the eurozone go deeper than expected.

Add to that the fact that there are still housing market troubles in the US economy, and the disappointing news from Oracle, and risk appetite is fading fast. With risk appetite fading, Forex traders are looking for safe haven, and the US dollar is backed by the world’s most stable taxpayer base. It is little surprise that the dollar index is on the rise, and that the dollar is gaining against the euro.

In this high volatility situation, though, things could quickly change. Forex traders should stay on their toes, ready for whatever happens next.

At 15:55 GMT EUR/USD is lower at 1.3046, down from the open at 1.3082. GBP/USD is slightly higher at 1.5665, up from the open at 1.5662. USD/JPY is higher at 77.9225, up from the upen at 77.8910.

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