Posted by Allison on 14 April 2011, 14:44
It’s often the case that a particular currency will be battered in the markets due to a number of conditions. Some of these may even be out of its control, and yet the currency still suffers as a result. Thankfully many of these situations are temporary in nature and thus rectify themselves after a time.
If we had to look for a currency that has taken a battering on the currency converter of late to illustrate this point, we would not have to look any farther than the US dollar. This currency is the reserve currency of the world and yet this does not make it immune to weaknesses and fluctuations. In fact those who believe it is approaching the end of its days as the top reserve currency may have had good currency of their own to strengthen their arguments.
The main focus of attention these past few weeks – for many reasons – has been the nuclear crisis that has been unfolding in Japan. This has been partly the reason for the bad performance of the dollar too. It has not been seen as a safe haven and this is one of the reasons why it will struggle at the moment, as there seems to be no end in sight to its woes. On one occasion it rallied slightly before going back to where it had been sitting before, which wasn’t in a good position.
It has also been collared by the high flying Euro, which seems to be doing better than anyone thought it might. This is true given the situation developing in some parts of Europe, where countries are struggling to keep their financial heads above water.
So where is it next for the US dollar? Will it manage to tackle the strength of the Euro in some way or will the European currency remain on top for the time being? And what will happen with regard to the situation in Japan and how it is affecting the markets?
The US dollar may have some time yet to try and find its way out of the mire it appears to be sitting in.