US dollar index is starting out another week stronger, thanks in large part to difficulties plaguing the eurozone. While the Facebook IPO last week distracted Forex traders and investors from the crisis in the eurozone for a short period of time, focus is back on Europe, and what’s happening (or not happening).
Concerns about the eurozone continue to make the US dollar attractive as a safe haven. Even as concerns about Greece’s exit from the eurozone grow, the US dollar remains backed by the world’s most stable taxpayer base. On top of that, there is an expectation that other central banks — especially the ECB and the BOE — are more likely to ease monetary policies before the Federal Reserve does.
That said, there is still a chance that the Fed, led by Ben Bernanke, will engage in another round of quantitative easing. After all, if the eurozone crisis affects economic growth and recovery in the United States, a looser monetary policy will be desired. However, even with this concern, many still expect that the euro, and to some extent the pound, will bear the brunt of these troubles. As a result, the US dollar is expected to remain in high demand.
At 13:17 GMT EUR/USD is down to 1.2734 from the open at 1.2765. GBP/USD is down to 1.5787 from the open at 1.5800.
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