December 1, 2010

Dollar Weakens After Month of Strong Gains

Volcker says the U.S. currency faces an uncertain future

The U.S. dollar was trading down 1.22% at 0.76 euros. However, over the past month, the U.S. dollar gained about 5% internationally, analysts say. It has risen 4.4% in value year to date.

Its 52-week range is at 0.66-0.84 euro, with its value peaking against the euro in June.

The euro soared Wednesday after reports that the United States would support a larger IMF aid package for Europe. In afternoon trading, the euro traded at $1.3140, up from $1.3011 late Tuesday.

Overall, the euro declined about 10% internationally in November.

Late Tuesday, former Federal Reserve Chairman Paul Volcker, chairman of President Barack Obama’s Economic Recovery Advisory Board, said in New York that the U.S. dollar is in danger of losing its role as a global benchmark currency, according to Bloomberg.

“The growing question is whether the exceptional role of the dollar can be maintained,” Volcker is quoted as saying at the University Club of New York Tuesday night.

Currency ETF Performance

The Barclays iPath Euro/U.S.Dollar Exchange ETF (ERO) traded up about 1% Tuesday. Year to date, it is down about 10% -- with a 6% decline in November.

PowerShares DB U.S. Dollar Index Bullish (UUP) rose 4% in November and about 2% year to day. On Wednesday, though, it dropped 0.83%.

PowerShares DB U.S. Dollar Index Bearish moved up 0.76% Wednesday. It is off about 5% year to date.

In June, UDN was down about 15% from its December 1, 2009, level, while UUP was up about 15%.

Over the past 12 months, UDN dropped more than 8%, while UUP rose more than 8%.

An exchange-traded note tracking the British pound’s performance vs. the U.S. dollar, the iPath GDP/USD Exchange ETN (GBB), traded slightly lower Wednesday. It is down about 2.5% year to date.

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