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Dollar Is Weakening As The Day Progresses

Dollar Is Weakening As The Day Progresses
5/7/2012 2:06 PM ET

The dollar climbed sharply versus its European rivals, following the results of the elections in France and Greece over the weekend. As the trading day has progressed, the U.S. currency has been slowly giving some of those gains back. Concerns regarding the resolution of the debt crisis in the Eurozone have been brought back to the forefront after voters rejected austerity.

Francois Hollande, who got 52 percent votes, is now the new President of France, unseating Nicholas Sarkozy who got only 48 percent of votes. Hollande had alleged during the campaign that Sarkozy ruined the economy, while Sarkozy criticized the spending plans of Hollande.

Meanwhile, results of the Greek parliamentary elections held on Sunday showed that the two main parties -- the conservative New Democracy and the left-wing Pasok -- suffered huge defeats, with those opposed to more cuts winning almost 60 percent support in a general election.

The losses follow months of protests against austerity measures across the country after the government was forced to ask for two bailouts. While New Democracy, led by Antonis Samaras, remained the largest party, it fell short of an absolute majority, raising the possibility of fresh elections soon.

The dollar surged to over a 3-month high of $1.2954 versus the Euro after the elections this weekend, but has since scaled back to around $1.3050.

Eurozone investor sentiment declined markedly in May to the lowest level since September 2009, data released by think tank Sentix showed Monday. The corresponding index fell more than expected to -24.5 from -14.7 in April. The expected reading for May was -15.3.

The German construction sector contracted slightly in April, survey results from Markit Economics showed Monday. The seasonally adjusted construction Purchasing Managers' Index fell to 49.8 from March's 11-month high of 55.7. The index moved close to near stagnation.

German factory orders were better than expected in March, suggesting that the growth-engine of the 17-nation currency bloc may be undergoing a slow recovery. Underpinned by robust foreign demand, factory orders grew 2.2 percent in March from the previous month, the Federal Ministry of Economy and Technology reported Monday. The monthly growth far exceeded the 0.5 percent growth expected by economists and February's revised 0.6 percent expansion. The greenback has also pulled back from nearly a 2-week high of $1.6114 versus the pound sterling, to around $1.6185.

The buck has remained basically flat in comparison to the Japanese Yen on Monday. The currency is currently challenging the upper end of a 2-day range, around Y79.925.

Japanese Finance Minister Jun Azumi on Monday warned against speculative yen gains after the European election results and said the government is ready to act if needed.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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