US dollar ends week strong; euro down

Story link: US dollar ends week strong; euro down

The US dollar rallied this week as a result of both positive economic data and technical factors. Among the good news for the dollar was the fact that capital inflows were up, calming worries about financing the external debt. In addition, figures were released that showed US manufacturing has remained strong.

Another factor in the dollar’s success was data showing higher-than-expected inflation, which led analysts to assume that the Federal Reserve will continue its course of interest rate hikes.

The dollar was strong enough to make gains on the yen despite the presence of factors positive to the Japanese currency, including rising support for Prime Minister Junichiro Koizumi in the upcoming elections as well as a high foreign demand for Japanese equities.

Both the euro and the yen fell in relation to the US dollar during the week, as did sterling and several currencies in emerging markets. The euro lost 2.3 percent on the week to $1.2145 in relation to the US dollar by the end of morning trading on Friday in New York, while the yen lost 1.1 percent against the US dollar to ¥110.65. Sterling also fell 1.1 percent in relation to the dollar over the week, to $1.7954.

In emerging market currencies, the Brazilian real lost 3 percent to the US dollar this week, to R$2.4455, while the Mexican peso was down 1.2 percent to 10.7545 pesos to the dollar and the Turkish lira fell 1.6 percent to TL1.373 in relation to the US dollar.

On the other hand, both the yen and sterling gained in relation to the euro. Positive factors for the yen took it up 1.2 percent against the euro, to ¥134.38. Sterling was able to rise in relation to the euro on the belief that UK interest rates will not fall any farther as the UK currency was up 1.2 percent for the week to £0.6771 in relation to the shared European currency.