Dollar rebounds after Asian and European concern over its Weakness

USD

After hitting a 14 month low against a basket of currencies on Monday, the Dollar rallied on Tuesday after Henri Guino, a top French economic advisor said that the weak Dollar is a disaster for the Eurozone.

The sentiment in the Forex mar ket was also echoed by a top Chinese official who is concerned with the recent strength of the Yuan versus the USD and was quoted as saying that there needs to be a turnaround for the Dollar soon or it will adversely affect the Chinese economy.

China is the largest US debt holder and as such has been vocal about bringing about a change in the reserve system. However, Tuesday’s comments showed how susceptible the Chinese economy is to a weak Dollar, quelling, for the moment, talk of ditching the Dollar.

At 10:00 PM GMT, the USD was up .21% to the Euro to 1.493, up .15% versus the Japanese Yen to 90.7, up .32% to the British Pound to 1.6366, up .73% against the Australian Dollar to .9222 and up .07% to the Swiss Franc to 1.012.

CAD

The worries about Dollar weakness have also seemed to affect policymakers to the North as the Bank of Canada left interest rates unchanged, a move that prompted traders to punish to Canadian Dollar on Tuesday.

The US and Canadian Dollars closed last week off near parity, and as a result, it appears from the BOC’s statements that this level helped shape their decision to leave interest rates at a record low .25 percent.

At 10:10PM GMT, the Canadian Dollar was down 2.05% to the US Dollar to 1.0492, down 1.92% to the Euro to 1.5672, down 1.45% versus the Australian Dollar to .9688, down 1.58% to the Japanese Yen to 86.44 and down 1.72% against the British Pound Sterling to 1.7175.

Chart: GBP/USD

There has been much talk about the GBP/USD Tuesday with its move through the trend-line resistance.

The big support at 0.9080 was also in play in the EUR/GBP. The Bank of England’s leader, Mervyn King could either confirm or spoil the technical break Wednesday. From a fundamental perspective, it's tough to see what the driver should be for a further appreciation in the GBP/USD.