The Dollar Refuses to Fall

The U.S. currency takes advantage of Greece’s budget problems to put pressure on the euro.

On Friday, the value of the dollar went up 1 kopeck. The ruble, however, closed stronger against the dual currency basket. Foreign exchange rates show that the euro has dropped due to investors’ fears of Greece’s debt problems. Financial experts note that investors are refraining from any major trade activity while they wait for the U.S. labor market data release. This information will greatly influence the activity of the dollar in the coming days.

At the end of the trading session, 11:30 p.m. Moscow time, the dollar’s weighted average increased by 1.49 kopecks to 29.8366 rubles.

While the euro weighted average rate decreased by 21.26 kopecks to 40.5104 rubles, the cost of the currency basket fell 9 kopecks to 34.64 rubles.

On Thursday, the price of the dollar practically remained the same. However, due to the growth of the euro, the ruble “dipped” in relation to the currency basket.

This time, due to the falling euro, the ruble will get stronger. The dollar remains firm due to the trends of the international currency market. “It was already after the close of trading in Russia that the dollar had significantly appreciated against the euro at the North American session,” Kalita-Finance’s senior analyst Andrei Gangan reported to Vzgliad.

Investors’ fears regarding Greece’s debt problems played a major role in this, as well as a sudden credit rating drop for one of the largest financial institutions in Europe, Deutsche Bank.

As expected, the new austerity plan introduced by the Greek government encountered serious resistance from the country’s trade unions, who last night seized the Ministry of Finance building.

“Future mass strikes and rallies will have a very negative effect on the Greek economy, which in turn will reduce the amount of this year’s expected tax revenues,” says Gangan. “It’s against this type of a backdrop that the investors are less optimistic about the prospects of Greece.”

Another negative factor for the euro was Moody’s decision to downgrade the Deutsche Bank rating two notches (from Aa1 to Aa3). “It can be concluded that the situation in the euro banking sector zone is not the most favorable” says Gangan.

According to FxPro financial analyst Alexander Kuptsikevich, in anticipation of the U.S. labor market statistics publication, investors prefer to refrain from any major transactions “that result in going around in circles day after day.”

“Some fear that Greece may not receive the aid from Germany, and although the European Central Bank’s President Jean-Claude Trichet predicted stronger GDP growth forecasts for the Eurozone, overall, the review is not until 2011. As a result, the euro/dollar [exchange rate] is again at 1.3580. Either way, it has been at this level for the past 12 trading sessions,” he tells Vzgliad.

The currency market is frozen, but not for long, says the analyst.

“Next week 40.50 [rubles] to the euro may be the turning point and the dollar/ruble pair may continue its decline, moving from 29.83 to 29.60 following the trend observed since the beginning of February,” predicts Kuptsikevich.

While the funding continues to flow in, it should put some pressure on the dollar.