US Dollar Index set to strengthen further as Friday 13th was bad news for the euro

The US Dollar Index is set to strengthen further in the coming days after Friday 13th became a bad news day for the euro after Greece debt talks fell apart and S&P finally downgraded 9 EU countries, whilst traders continue buying dollars and selling euros as the European currency crumbles.

Latest Dollar Index Rate

The ICE US Dollar Index, which tracks the US dollar against six major world currencies closed Friday’s trading session at 81.791, from the session open of 81.125.

The coming week could see the Dollar Index climb back through 82 and beyond as investors continue to sell the euro.

S&P Downgrade

S&P cut the ratings of nine eurozone countries on Friday night with France, as the area’s second largest economy, the biggest of its scalps. The response of the markets was instant, the euro tumbling to its lowest level against the US dollar since August 2010, at just over $1.26, and the stock markets also fell following the S&P announcement.

Greece Rescue Hopes Fade

Greece faces its most difficult challenge since the second world war after the unexpected collapse of talks over a debt swap deal with its private creditors on Friday, the country’s finance minister said at the weekend.

As Athens prepared to salvage nearly three months of negotiations, Evangelos Venizelos said time was of the essence if the debt stricken nation was to win this battle.

Amid gloomy warnings about the stalled progress of talks on rescuing the troubled Greek economy, the announcement raised fresh doubts about the euro’s future.

Discussions over the deal, key to keeping default at bay and unlocking a second €130bn aid package for Greece stalled when it became apparent that neither side could bridge their differences over interest rates on the new bonds.

Rise of the US Dollar

Long viewed as a safe investment in times of economic turmoil, the US dollar continues to demonstrate its value following hopeful signs of an economic recovery in the US, whilst Europe looks like recession for 2012 is clearly on the cards.

As a result, the US dollar continues to be seen favourably by investors looking to diversify their investments into safe haven asset classes amidst the economic turmoil of the eurozone sovereign debt crisis.

This, along with the fact that the US Fed continues to keep the prospect of more quantative easing in the pockets for now, is keeping the US dollar on top of the euro currency, and pushing the euro to US dollar currency rate to new 16 month lows.

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US Dollar Index set to strengthen further as Friday 13th was bad news for the euro