The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4280 level and was capped around the $1.4370 level. Liquidity is expected to remain relatively light through next week as traders prepare for Christmas and the New Year's holidays. Key economic reports will be released this week and the market could move significantly on account of decreased liquidity. Dealers are still citing lingering effects from Greece's fiscal crisis and global credit concerns are adding to the U.S. dollar's status as a safe-haven currency. In recent weeks, the U.S. dollar has benefited despite its negative interest rate differentials versus other currencies. For most of the year, traders chased higher-yielding currencies but the dollar's recent appreciation - coincident with ongoing improvements in U.S. equity markets - suggest traders may be starting to once again focus on fundamentals such as economic growth prospects. There is a growing sense the Federal Open Market Committee could unwind some of its emergency lending programs earlier than previously believed. June 2010 fed funds futures are implying a rate around 0.285%, above the current rate of 0.15% and current target range of 0% to 0.25%. Chicago Fed President Evans today warned the unemployment rate will probably remain quite high in 2010. In eurozone news, European Central Bank member Stark reported the unwinding of monetary stimuli is going to be gradual and progressive and said some measures have negative side effects. On a negative note, he added the banking sector may shrink in the future and warned credit conditiobns may be less comfortable in 2010. Euro bids are cited around the US$ 1.3885 level.
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