Submitted by: Submitted by kap48746
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Date Submitted: 04/12/2010 04:51 PM
In 2009 the United States dollar had significant flucuation though out the year. Part of the reason for this is that investors rediscovered their taste for risk and refocused on the flaws of the dollar.1(Year-End)
The J.P. Morgan Chase index that tracks the dollar against 16 other currencies showed that the dollar ended the year down 5%. At one point, in the spring, the dollar was up as much as 8% according to the index. In the fall of the year the dollar had switched to being down by 8%.1(Year-End)
By the end of the year the dollar had rallied a little. The economic date reported by the United States surpassed expectations. However countries that use the euro, for example Greece and Spain, saw the euro decline in value making them less creditworthy.
Some investors saw the raise of the dollar as a sign that bigger changes were coming. Rather than trading as a proxy for how much risk investors are willing to take -- as it has throughout the financial crisis -- the buck may once again rise and fall on the state of the U.S. economy as it compares to its global peers.1(Year-End)
Jeremy Urwin, a currency trader at Barclays Capital in New York, stated that “Investors are likely to focus on a relative economic performance instead of simple risk-on, risk-off bets.” Mr. Urwin also stated that “differences in interest rates between countires are going to come to the fore for currencies in 2010.1(Year-End)
If the United States economy continues to surpass expectations while others are disappointing this could be good news for the dollar. The dollar however could end up staggering backwards if the economic recovery is more fragile than it is thought to be. The this were to happen it could cause inflation to rise.
For most of the fall in 2009 the financial markets were fixed on a single thing, the dollar versus everything else.1(Year-End) When the dollar lost value stocks, oil, and gold prices rose and when the dollar gained value the opposite...