The dollar reached a new high of three weeks on Thursday against a number of currencies
January 3, 2013 – The dollar reached a new high of three weeks on Thursday against a number of currencies, while the common currency euro dropped to mid-December levels on concerns that more wrangling will take place over the U.S. budget.
The initial euphoria over a deal to avoid the so-called fiscal cliff that included huge budget spending cuts and tax increases on Tuesday helped to push down the dollar, especially against the riskier currencies. However, that optimism quickly was lost as worries about budget talks in the future emerged.
Because of that, the U.S. dollar got a boost, taking it to its strongest level since December 11. The dollar often times is favored when there is uncertainty in the market and strategists said it should move even higher in the next few weeks.
One currency strategist said budget talks in the U.S. will go on for another two months or more and they could turn sour. Because of that, it could get messy ahead and that would help the dollar reclaim some lost ground.
With the dollar rising, it helped push down the euro by 0.7% to a low of three weeks at $1.3082 after it triggered stop loss sell orders when it reached $1.3090.
Underlining the concerns of the market that the new deal left a number of key deficit issues in the U.S. unresolved, Moody’s Investors Services, the rating agency, said the U.S. needed to do something more to protect its debt rating of Aaa.
Strategists said the current euro weakness could go on due to the euro zone’s weak fundamentals, because of any new debt concerns in the common currency region and because of increasing prospects of a rate cut in interest by Europe’s Central Bank.