Euro to Dollar Rate Little Changed

The Euro to Dollar exchange rate was little changed in Tuesday’s trading. A decline in European shares caused the euro to dollar rate to erase earlier gains made by the euro due to larger than expected gains in German investor sentiment. Investors remained concerned about the health of US banks.

Financial Institutions Struggling

Banking giant Mellon reported a decline in profits of over 50% and State Street Corp reported an 8-12% decline in operating revenue. The earnings reports caused a decline in stock markets and reinforced the view that financial institutions are struggling and recovery will take more time. Economists say that mixed reports from financial institutions are keeping risk aversion high and are affecting the euro to dollar rate.

Investors Dump Euro in Favor of Dollar and Yen

These mixed reports have caused many forex investors to dump the euro in favor of safe haven currencies which include the US dollar and the Japanese Yen. The Euro to dollar exchange rate remained unchanged at $1.2920, down from a high of $1.2988. The euro to dollar rate had risen in advance of the ZEW report which measures German investor confidence.

Euro to Dollar Rate to Remain Under Pressure

The euro to dollar rate is expected to remain under pressure due to uncertainty whether the European Central Bank will adopt unconventional policies to address the ongoing global recession. The ECB is seen by many economists as behind the curve in adopting policies to address the recession and credit crunch and this has had an adverse effect on the euro to dollar rate in currency markets.

Investors Focus on Health of Banks

Investors are expected to continue the focus on banks and the health of the financial industry. There is a great deal of uncertainty over how well lenders will perform if the global recession proves to be longer and deeper than expected. Risk aversion is expected to continue to put pressure on euro to dollar rates on Forex exchanges.