Dollar Holds Recent Gains

The US dollar held onto advances in advance of the Federal Reserve meeting. Most analysts expect the Fed to keep interest rates at near zero for the near future but will be watching for language indicating possible shifts in policy. Falls in stock prices on both sides of the Atlantic boosted the dollar as risk sentiment wanes. Banking troubles in the UK ad Euro Zone caused investor concern about the health of the banking system. Shake ups at the Bank of Scotland and Lloyd’s pressured the pound which fell 0.5 percent on the day to $1.6308.

Euro Zone Banking Problems, Gold at Record Highs

In addition to bank troubles in the UK the European Commission said that bank stress tests showed that Euro Zone banks could lose up to 400 billion euros ($590.9 billion USD) in 2009-2010. Gold reached a record high of $1084.70 following news that the International Monetary Fund had sold 200 tons of gold to the India’s central bank. Most analysts do not believe the rise in gold is due to risk aversion trades. The U.S. Dollar Index .DXY gained 0.10% to 76.368.

G 20 to Meet This Weekend

The euro vs. dollar rate was down 0.56% trading at 76.368 and against the Japanese yen the dollar fell 0.03% to 90.30. Investors remain cautious in advance of a slew of economic data due this week. The US jobs report is due on Friday and the G 20 nations meet this weekend in Scotland and currencies are expected to be on the agenda. The Aussie dollar which has been a big winner in currency markets fell 1% after the Australian central bank raised rates for the second month in a row to 3.5%. Andrew Robinson of Saxo Capital Markets stated, “We have a slew of central bank meetings starting today. It’s going to be a bit uncertain and nervous, and under the circumstances a bit of range trading.”