Dollar knocked off top spot in face of economic problems

David Hobart

The US dollar was brutally removed from its position at the top of the forex trading hierarchy on Tuesday and into Wednesday after manufacturing data appeared to hit it hard.

It was announced that American manufacturing sector activity went down significantly across the month of September, and that it was facing its lowest level in over 10 years.

The figures, which were released from the Institute for Supply Management, revealed that the latest index was 47.8.

This was the worst performance for the metric since June of 2009.

According to press reports, the key figure is 50 – and if this index goes below that, there are signs that the factory world is seeing a contraction.

There were fears that the move could spell bad news for the September unemployment rate figures which are expected at the end of this week.

It is believed that the two indices are interconnected, and there is a worry that the developments today could cause problems then as well.

Geopolitical forces also combined to cause the kind of uncertainty that can put the dollar at risk.

News from North Korea, for example, appeared to show that a missile experiment may have occurred in the secretive Asian country, leading to renewed fears about the state of global politics.

In its pair against the currency market’s so-called safe havens, the US dollar was recorded at low points.

It went down to 0.9923 in its pair with the Swiss franc, and it also dropped, albeit only a little, in its pair with the Japanese yen.

Compared to less safe haven oriented pairs, it was also down. It went down in its pair with the single European currency to $1.0940, and it even went down compared to the Antipodean currencies – which were suffering from a bad week to begin with.

The dollar index, a tool which is designed to monitor how the currency is performing in its pairs with six other currencies from around the world, was also down.

It was seen at 99.087 at one stage – which is a far cry from its position of 99.667 seen just a few hours before.

Elsewhere around the world, the Australian dollar managed to mop up some of the gains left in place of the dollar’s decline.

Despite the fact that the Australian dollar was performing at its worst level for a decade earlier in the week due to yet another interest rate cut in the country, it rose by a small amount thanks to the dollar’s decline.

It was seen at $0.6708 at one stage – but analysts appeared to predict that there was little chance of this rise being sustainable or long-term.

The British pound was suffering, despite the opportunities which the dollar’s overall decline posed for it to do well.

At one stage it was seen at $1.2296 in its pair with the US dollar, which represented a decline as well.

This came largely due to nerves within the markets about the speech from Boris Johnson to the Conservative party conference, which is expected to take place today.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

David Hobart
Forex.com logo74% of clients lose money. Capital at risk.

- Trusted Global Market Leader
- Online FX & CFD Trading
- 180+  Global Markets, 84 FX pairs, 65 shares, 17 popular indices and more
- Forex, Indices, Commodities, Equities & Bitcoin
- Available to US traders

eToro LogoYour capital is at risk

- Trade 15 cryptocurrencies
- Beginner friendly