U.S. Dollar Steadied in Early Trading in Asia

On Tuesday, March 25, 2008, in Sydney, the U.S dollar fell slightly against major currencies after yesterday’s gains resulting from improved investor’s sentiment about the U.S. economy.  In early trading (00:15 GMT), the U.S. dollar traded at 100.72 yen, compared to 100.75 yen, and the Euro traded at $1.5436 compare to $1.5424.

On Monday, March 24, 2008, the National Association of Realtors announced that sales of exiting homes in the United States increased by 2.9% last month, which is higher than what the economists had expected.  This increase can be attributed to the lower value of the homes and the Federal Reserve’s efforts to mitigate the liquidity crisis.

The U.S dollar recovered against the yen because investors seem to be moving back to dollar-denominated assets, and as a result, the yield on the 2-year Treasury Note increased by 50 basis points.

For some time now, it had been rumored that authorities in China and Japan were contemplating selling part of their U.S. dollar-denominated assets.  It appears, though, that the authorities are fully aware of the impact of such an action on their own foreign reserves and their relationship with the United States and as a result, this rumor has somewhat faded away.