US Dollar Strengthens against the Single Currency over Portugal’s Debt Crisis

The greenback strengthened against the euro on Friday as the investors were uncertain about the debt situation in euro zone. The news of reduced credit rating for Portugal by Standard and Poor weakened the single currency. Standard and Poor cut down its credit rating to BBB from A minus for Portugal which has made Portuguese bonds less attractive for investors.

This has resulted in less liquidity and has made Portuguese bonds less attractive to be used as collateral in money markets. Director of currency research Kathy Lien form GFT commented, “For most of the week, the market has treated Portugal as an isolated problem that will not spread to other parts of Europe, but this sentiment is losing popularity very quickly.”

The real disappointment came from the results of the recent meeting for European Union which was held in Brussels in which plan to boost the lending capacity of euro zone was further delayed.

The euro declined to 1.4129 versus the US dollar on Friday as compared to 1.4181 on Thursday’s North American trading session.

The dollar index DXY which measures the US dollar’s performance against its six major rival currencies gained to 75.908 as compared to 75.665 on Thursday’s late trading hours.

The US dollar also strengthened as the revised US gross domestic product figure was up by 3.1 percent for the fourth quarter as compared to earlier estimate of 2.8 percent.

The US dollar also remained strong against the British Pound as the Pound Sterling dropped to 1.6083 versus the greenback as compared to 1.6119 on Thursday.

Against the Japanese Yen the US dollar slightly increased to 81.16 as compared to 80.98 on Thursday.

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