The U.S. dollar was the prime beneficiary when China’s central bank announced an increase in bank reserve requirements, since any slowdown in global economic growth tends to undermine the attractiveness of the higher yielding assets.
The euro is lower due to the ongoing uncertainties concerning the status of Greece’s budget deficit situation, along with a weaker than expected euro zone gross domestic product report. Gross domestic product in the euro zone was up only .1%, which compares to an estimate of a .3% increase.
The Australian dollar and the Canadian dollar fell on China’s bank reserve requirement news. Anything that slows the global recovery is likely to limit commodity price gains.
In the longer term, the “commodity currencies,” the Australian dollar and the Canadian dollar should be the strongest currencies, as the global economy continues to recover, and in spite of China tapping the breaks on their economy.
