The US dollar which is measured by the US dollar index is retracing the ground it lost and is closing in on the 81 yen mark. The extension of the debt maturity and cutting of the interest rate for debt ridden Greece has declined the world’s reserves. The US prices have climbed up and have countered the effects of low labor market data. Presently there are little losses at 81.08 which are about 0.02% on the negative side. The manufacturing sector of the U.S. has shown mixed results. The dollar is gaining also due to weakness of the yen, owing to the surprise elections to be conducted in December which would lead to unlimited easing of the yen hence diminishing its role as the safe haven.
The Euro Zone Crisis
The debt crisis being faced by the euro zone has landed it in another recession state in spite of the economic growth in Germany and France. The seventeen nations under the pangs of recession could not be aided with the 0.2 percent growth in Germany and France. There was another 0.1 percent decline in the third quarter following the 0.2 percent drop in the second. These two quarters affected the entire euro zone. Italy and Spain have been in such a state since a year and Greece is already in a critical stage of depression. Recovery seems far fetched as the recession that spawned in 2009 is preventing all efforts of a sustainable recovery. The final three months might make even the two biggest economies of the euro zone to bend under the weight of recession.
Yen Falls On the Prospect of Unlimited Easing
The yen which was only bought by traders as an alternative safe haven for the dollar has conceded a drop not because of an increase in the risk appetite of the traders; neither is the reason a strong image of the U.S. dollar rather it is due to the surprise announcement by the Japanese prime minister Yosihiko Noda to conduct elections. An unlimited easing policy of the opposition leader who is most likely to be the new leader of Japan has made the Japanese yen to fall to its lowest level since late April. Thereby the Japanese yen has become an unsuitable choice for safe haven which means increased flow of investments to the U.S. dollar.
Crude Oil Futures Weak
The release of the oil weekly data from the U.S. led to the broad decline in the oil prices. The situation in Gaza is being monitored by the traders. If the violence is going to widen, it would adversely affect the global oil supplies. Despite this the supply is still ample over the uncertain condition of demand. Light crude has fallen to $86.22 a barrel which is 10 cents lower and Brent crude was up 41.09 cents to $110.70 a barrel. The Energy Information Administration showed that the crude oil stocks rose 2 million barrels in a week.