Dollar Falls Against the Euro on Increased Risk Appetite

By TraderVox.com

Tradervox.com (Dublin) – The US dollar fell from a three-week high against the euro as a gauge of US manufacturing showed the economy is gaining momentum. This dampened the demand for safety increasing risk appetite in the market. The dollar also fell as stress-test results from Spain showed more confidence in financial institutions in the country. The 17-nation currency has improved against most of its peers as Euro Zone is deemed to be heading closer to a solution.

Dan Dorrow, who is the head of research in Connecticut at Faros Trading LLC, indicated that the dollar weakened against the euro as risk appetite was spurred by the good ISM manufacturing data. The dollar declined by 0.2 percent against the euro to trade at $1.2888 at the close of trading yesterday in New York after it had gained 0.4 percent to reach its strongest level since September 11 of $1.2804. Japan currency remained strong against the dollar trading at 77.99 just below the psychologically important line of 78. The Japanese currency dropped against the euro by 0.3 percent to trade at 100.52 yen.

According to Eric Viloria, a Senior Strategist in New York at Gain Capital Group LLC, the euro has been up against most of the other currencies mostly because of the technical analysis rather than fundamental one. He indicated that the 200-day moving average for the euro, which has been supportive of the euro-dollar pair since September 11, has been the market talking point for quite a while now. With spurred risk appetite, the Standard & Poor’s 500 Index rose by 1.1 percent but later dropped 0.3 percent yesterday.

The dollar dropped after the ISM Index of US manufacturing advanced to 51.5 in September according to Tempe. The figure indicates that manufacturing sector in US is improving and it has gone back to expansion. The market was expecting a reading below the level of 50, which is the dividing line between expansion and contraction.

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