US Dollar Strengthens Throughout Week on Demand for Safety

The US dollar strengthened this week as the concerns for the spreading of the European sovereign-debt contagion and the worries about the tensions between North and South Korea boosted the demand for the safer assets.

The concerns about the European debt crisis increased after the Standard & Poor’s Ratings Services downgraded Ireland’s long-term sovereign rating two steps from AA- to A. Now concerns shifted to Portugal and Spain. The Financial Times Deutschland said that the Eurozone policy makers were convincing Portugal to accept the bailout to prevent the spreading of the debt problems to Spain. Elena Salgado, the Minister of Economy and Finance of Spain, said there is no risk that Spain would require the aid.

The dollar also strengthened after the Korean conflict heated. North Korea fired the artillery shells on November 23rd, killing four men. North Korea voiced concerns as the US sent the aircraft carrier USS George Washington to take part in naval exercises with South Korea. The tensions spurred the safer currencies, but allowed the dollar to outperform the Japanese yen, which is also considered the safe currency, because of Japan’s close proximity to the conflict.

EUR/USD tumbled from 1.3736 to 1.3248 this week. GBP/USD dropped from 1.6001 to 1.5591. USD/JPY advanced from 83.45 to 84.09, following the drop to 82.78.

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