US Dollar Strengthens on Tax Reduction & Global Uncertainty

The US dollar gained against the Japanese yen today on the speculation that the extended tax cuts would help the economy of the US. The currency also posted gains versus the euro, before retreating, as the concern for Europe’s debt troubles increased the appeal of the greenback as the safe currency.

The tax rates, set in 2001 and 2003, were scheduled to increase on December 31st. Now the US President Barack Obama extended the tax reduction for two years. The Dollar Index, which tracks the dollar versus the currencies of the six major US trading partners, gained 0.3 percent.

The uncertainty and the financial turmoil, mainly because of the debt problems in the countries of the European Union, prompt the investors to turn to the safe currencies. Dominique Strauss-Kahn, the Managing Director of the International Monetary Fund, said today that “the situation in Europe remains troubling, and the future is more uncertain than ever”.

EUR/USD traded near 1.3254 as of 20:24 GMT today after it opened at 1.3261 and fell as low as 1.3180. USD/JPY went up from 83.49 to 84.05, following the gains to the intraday high of 84.30.

If you have any questions, comments or opinions regarding the US Dollar,
feel free to post them using the commentary form below.