Election results hurt euro, NZ dollar; investors await US Fed decision; Canadian dollar up

Election results hurt euro, NZ dollar; investors await US Fed decision; Canadian dollar up

Story link: Election results hurt euro, NZ dollar; investors await US Fed decision; Canadian dollar up

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The euro was down on Monday as a result of the outcome of Sunday’s election in Germany. The election ended, as predicted, without a clear majority for any party. Both the Christian Democrats and the Social Democrats were claiming a mandate to rule despite the fact that the Christian Democrats won only three more seats in parliament than did the Social Democrats.

The euro was down to $1.2155 in relation to the US dollar after having fallen as far as $1.2101 earlier in the day. The shared currency was also down by 0.8 percent to ¥135.27 in relation to the yen, while it fell 0.2 percent to SFr1.5506 against the Swiss franc and by 0.1 percent to £0.6735 versus sterling.

Most attention in relation to the US dollar surrounded the decision by the US Federal Reserve, due Tuesday, on whether to continue monetary tightening by raising US interest rates again or not. Most analysts expect the rate to be raised to 3.75 percent on Tuesday but a few others, notably at UBS, say they think the Fed will pause this month to assess the effect of Hurricane Katrina on the US economy.

The US dollar was trading at ¥111.27 in relation to the yen and at SFr1.2754 versus the Swiss franc.

The Canadian dollar was up 1 percent to $1.1681 against the US dollar, helped by the rise of the price of crude oil and by international securities transaction figures which had July inflows substantially higher than expected.

Sterling sat at $1.8032 versus the US dollar as the International Monetary Fund cut UK growth forecasts for both 2005 and 2006. There were also concerns about the housing market and consumer sentiment.

The New Zealand dollar was down to $0.7013 in relation to the US dollar on election results that were very close, as the ruling Labour party scored only one seat more than the National party on Sunday and talks toward the formation of a coalition government began.