US Dollar Strengthens on Lowered Eurozone Expectations

US dollar is strengthening after showing some softness earlier today. Euro strengthened on some hopes for the EU summit underway, but, as expectations become lowered regarding the outcome of the meeting, euro is losing ground.

Concerns about whether eurozone countries can agree on a solution to the sovereign debt crisis threatening the survival of the eurozone as it is presently constituted — and possibly the euro itself — are undermining some of the earlier optimism about what could be next.
Instead, Forex traders are seeking safe haven, and that means that the US dollar is favored over the euro, and over the Great Britain pound (the United Kingdom has significant exposure to European sovereign debt). Of course, the desire for safe haven doesn’t mean that the greenback is gaining against all currencies. US dollar is down against the Japanese yen. Indeed, yen strengthening enough against the dollar and the euro that whispers of another BOJ intervention are starting.
For now, the US dollar is likely to remain stronger on the Forex market. As long as the fate of the eurozone is in doubt, we are likely to see some caution in currency trading. But traders should be on the alert: The moment EU leaders announce an agreement, everything could change.
At 16:09 GMT EUR/USD is lower at 1.3832, down from the open at 1.3908. GBP/USD is lower at 1.5899, down from 1.6002. USD/JPY is down to 76.06, from 76.09.

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