As this week comes to an end, the U.S. dollar declines sharply today, cutting some of the gains recorded during the week, where optimism spread in the market as European nations are working hard to prevent the debt crisis from spreading further; however, eyes are focused on the Italian Lower House of Deputes, who are to vote on the 2012-budget plan.
The U.S. dollar index (USDIX), opened the session today 78.31, and recorded the highest at 78.33 and the lowest at 77.61, and is trading in the moment at 77.62.
The slight optimism seen in the market is driven by the serious steps taken by Italy and Greece, where both nations are acting quickly to implement the measures needed to avert deeper debt crisis, where Italy accelerated the implementation of the austerity measures as a final vote is expected from the parliament today, and then Mario Monti, the Italian fresh Premier will have the green light to impose spending cuts in attempts to save the nation from following Greece's steps into default-risks.
Greece, on the other hand, is one step forward in the implementation of the austerity measures, where the Greek government is acting as quick as possible in order to obtain the sixth tranche of last year's bailout package, where Lucas Papademos, the former European Central Bank Vice President and the current Greek Prime Minister, main objective is obtaining the financial aid, as Greece could go bankruptcy as soon as next month without any financial support.
The U.S. dollar rebounded sharply to the upside this week on rising yields on Italian bonds, which was followed by rising yields on French and Spanish bonds, where investors fled to the low yielding currency as their appetite for risky investments deteriorated, reflecting negative demand for the threatened common currency and spreading losses across the board.
The U.S. dollar index started this week at 76.66, recording the highest at 78.46 and the lowest at 76.66, and is heading for weekly gains, extending those recorded in the past two weeks.
However, the European Central Bank bought Italian and Spanish bonds to prevent pessimism from spreading further, where rising yields on bonds of indebted nations could lead the debt crisis to worsen further as European indebted nations may not access the capital market in the near term in case yields kept on rising, and even though they could, the unsustainable yields could sent them into larger problems as they hold more debts and have to pay more on every single euro they borrow.
The euro rebounded today after deteriorating during this week, where after the opening of $1.3453, the EUR/USD pair reached a high of $1.3600 after setting the lowest at $1.3446, and is trading in the moment around 1.3597.