In early morning trading today, the U.S. Dollar and Japanese Yen lost ground against the Euro, amid investors’ hopes that Lehman Bros., a U.S.-based investment banking giant, will soon be saved. This boosted equities and as a result, currency dealers promptly cashed in on the currencies’ strong gains in recent weeks.
Sources indicate that the Federal Reserve Bank and the U.S. Treasury Department are involved in meetings with potential Lehman suitors, and the hope is that by the end of the up-coming weekend a successful conclusion will have been reached. That speculation led to a Wall Street rally, late on Thursday. At the opening of the European stock markets today, prices were up by more than 1%.
Investors will once again watch for specific signals from the U.S. banking sector, the equity markets and investors’ risk appetite. Despite the fact that major economic figures are expected to be released today (U.S. retail sales prices, producer prices, etc.), the focus will primarily be on the banking sector. According to David Powell, Bank of America currency strategist, the markets will watch what happens in the banking sector closely, as the U.S. dollar has “completely detached from any U.S. economic fundamentals.”
At early morning trading, the Dollar Index, which measures the value of the greenback versus 6 major currencies, was down one third of a percentage point to 79.56 DXY; on Thursday, it had reached a high of 80.375.
The U.S. Dollar traded up against the Japanese Yen at 107.50 Yen, while the Euro gained against the U.S. Dollar at $1.4105. The euro also gained against the Yen and closed at 151.50 Yen.