Dramatic Run For The Dollar

The dollar rose by the most in eight years against the euro, as traders priced in less chance of a rate increase from the European Central Bank after ECB President Trichet expressed concerns yesterday regarding European growth prospects by saying they would be "particularly weak" through the third quarter. During Thursday's post-decision press conference, Mr. Trichet reiterated that the ECB currently has "no bias," which traders took as a sign that the bank would remain on hold through the September meeting when the ECB will also present its new growth projections. In recent trade, the dollar had gained 1.87% on the euro, 1.26% on the pound and 0.58% on the yen.

Oil was falling strongly as the dollar advanced with a 3.24% loss on the day, even as a conflict in Georgia brought in Russian troops to aid the Georgian government's battle against separatist forces. A fire in a Turkish pipeline, which has disrupted flow of 400k barrels per day, was expected to be extinguished this weekend and the pipeline was estimated to be back online within 10 days.

The fall in oil prices was giving a boost to equity markets even after mortgage giant Fannie Mae reported its fourth-straight quarterly loss and said it would reduce its dividend to 5 cents per share. Its shares were recently down 8.84% but the financial sector was still trading in positive territory as the KBW bank Index was up 0.92%. All three major stock indexes were comfortable ahead on the day, with the DOW up 1.69%, the S&P 1.41% and the NASDAQ 1.71%.

The LFB-Forex.com