Dollar Retrieves Its Power

The eurozone has not been doing so well lately

A short time ago, the USA and the EU were trying to take advantage of each other in the field of the business activity and economic growth. The economic race has become totally different now - the two major opponents on the money market are currently competing with bad news only. There is nothing surprising that Europe is showing best results in the negative race.

Experts say, the American dollar is gradually retrieving its position against the European currency that it lost several months ago. Investors still hope for the improvement of the American economy. Yet, despite awful results in the labor market in the USA, American companies have started to post better results. Secondly, the economic news from Europe is getting worse and worse, which makes currency dealers reconsider their portfolios. The majority of analysts think, the dispute between the two major currencies of the world is not over yet, although the changes are clear already. Some specialists believe, the euro can drop even more later on.

During the daytime tender, the dollar rate raised up to 1.1352 dollars per euro vs. the level on Friday - 1.1498. This is the lowest position of the euro during the latest seven weeks. The Japanese yen raised up to 134.10 yens per euro vs. the level on Friday in London - 135.80 yens per one euro. The yen has not changed against the dollar -  117.90–118.20 yens per one dollar.

Dealers are certain, the reduction of the European currency has been caused with a very unpleasant piece of news from Paris. The French Finance Ministry said, the deficit of the French budget had increased by 25 percent over the first five months of the current year. The expenditure of the French treasury increased by 1.4 percent over the mentioned period and made up 118.71 billion euros. The revenue of the treasury dropped by 7.4 percent – to 89.51 billion euros. According to the conclusion of the French finance ministry, the French budgetary deficit is five billion euros as high as the EU budget law stipulates. According to the forecast, the deficit amount in 2003 is to make up 3.7 percent of the GDP vs. the previously forecast 3.1 percent. In addition to it, the EU wants France to cut the budgetary deficit at least to the level of three percent of the GDP. Economists say, there is no hope for France to restrain the deficit on a lower level.

There is nothing surprising about the fact that bad news from Paris was perceived very negatively on the international money market. However, experts believe, there were other reasons for the European currency to go down. American companies' stocks have become more attractive for investors against the background of optimistic news. Europe can not provide anything like that for investors at present. Until recently, market members were attracted to state bonds, and the weakness of the eurozone economy was not showing any considerable influence on the euro rate. However, the market is currently interested in stocks first and foremost, and the same investors start playing against the euro.

This week, RBC news agency reported, American companies started publishing quarter reports. Wall Street financial specialists expect, the acceleration of profit of the companies included on Standard & Poor's 500 database is to make up 5.3 percent over three months. The dollar is likely to rise further on against the euro.

In Russia, the dollar is strengthening against the Russian ruble too. The Central Bank announced the official dollar rate for July 8th on the level of 30.3014 rubles per one dollar. The public relations department said, the dollar rate had gained 1.08 kopecks in comparison with the previous level. However, the current strengthening of the American currency is not going to bring any good results to Russian people, who have already bid goodbye to a big part of their savings on account of the weak dollar.

The Macroeconomic Research Center of the company UniconRoof said, only ruble deposits returned profit for Russian people in June – the yield made up 0.08–0.15 percent. In June, the nominal strengthening of the ruble against the dollar and the euro made the yield of people's currency savings drop. The dollar rate reduced by 1.17 percent in June, and the dollar savings purchasing capacity slid by 1.95 percent. On the whole, the dollar savings have been devaluated by 11.6 percent since the beginning of the year.

Subscribe to Pravda.Ru Telegram channel, Facebook, RSS!

Author`s name Dmitry Sudakov
*
X