USD Advanceds to 6 Month Highs vs. Euro

Growing speculation that the global economy is heading into a slowdown has helped the U.S. dollar advance against the euro. The German Ifo Institute released its index of German business confidence this morning. The index fell to 94.8; it’s lowest in three years and significantly worse than the 97.2 reading that had been expected. This news and other negative news about other economies around the world has helped raise the outlook for the U.S. dollar since many analysts believe the U.S. economy has weathered the greater part of the credit crisis storm.

House loans for home purchases in the United Kingdom fell 65% from a year earlier in July. The news reinforces the view that British interest rates have peaked and will next be moving downward. The news sent sterling lower by almost a full percent against the U.S. dollar and hitting its lowest level against the greenback since July 2006.

The U.S. dollar also rallied against the Japanese yen and other currencies as it benefited from a boost in U.S. consumer confidence. The Conference Board reported that its index of consumer sentiment rose from 51.9 in July to 56.9 in August as consumers responded happily to dropping gasoline prices.

The Canadian dollar rallied to three week highs against its southern counterpart this morning, benefiting from rising crude oil prices. Oil prices were on the rise due to fears that Hurricane Gustav may move into the Gulf of Mexico and impact oil production. As a major oil exporter, Canada’s currency often benefits from rising energy prices.

- contributed by Christopher Empett
Associated Foreign Exchange