US Dollar Gains Ground as Uncertainty Returns

The euphoria is ended and now the uncertainty has set in. Concerns about the next big budget battle are weighing on risk appetite in the Forex market, and the US dollar is gaining as a result.

Greenback is higher against high beta currencies like the euro and the pound today, gaining ground as concerns about what’s next in the budgetary battle over the fiscal cliff and the debt ceiling take center stage. Only the tax situation was resolved with the latest fiscal cliff deal, leaving the spending portion to be fought over. And, at the same time, there will be a fight over the debt ceiling.

With Forex traders anticipating these fights, and unsure of what will happen next, it is little surprise that risk aversion has set in and the US dollar is being favored as a safe haven. Greenback is gaining against the UK pound especially with the added pressure on the pound resulting from concerns about the housing market.

For now, the dollar index is surging as the greenback is preferred.

At 14:48 GMT the US dollar index is up to 80.118 from the open at 79.812. EUR/USD is down to 1.3105 from the open at 1.3186. GBP/USD is also lower, at 1.6164, down from the open at 1.6255.

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