Over the reporting period, the U.S. dollar considerably improved its position against other major world currencies. Developments in Greece once again became the cause of strengthening of the American currency.

The meeting of representatives of political parties and the president of Greece held last Tuesday, May 15, to form a coalition government failed to come to an agreement. Most likely the country will have another round of parliamentary elections. This situation increases the possibility that the country may leave the euro zone, which transpired in closing long positions in risky instruments by participants of financial markets. This resulted in dropping of stock indices, oil prices and rates of precious metals. The gold rate reached $1,527 per Trojan ounce, which was lowest since December of last year. All this led to increased interest in safe-haven instruments, which traditionally are the U.S. dollar, the Japanese yen, and the Swiss franc.

On Wednesday, May 16, investors were focused on the minutes of the recent meeting of the Open Market Committee of the U.S. Federal Reserve, which were published late at night. Lately, rumors were circulating in the market that next month FRS may adopt measures of easing of the lending and monetary policy.

EUR/USD traded over the reporting period in the range between 1.2679 (low of Wednesday, May 16 and the lowest since January 17, 2012) and 1.2979 (high of Thursday, May 10). As a result, the European session closed on Wednesday at 1.2740, which showed a 1.6% decline of the euro against the dollar over the reporting period. Apart from Greek debts, an adverse impact on the euro had high yields of Spanish and Italian bonds, and a surprisingly low index of business expectations ZEW in Germany. Therefore, the ECB may be forced to take additional steps to stimulate the economy of the euro zone. Also, more pressure on the common European currency was put by news that the rating agency Moody's has downgraded ratings of 26 Italian banks with negative outlook.

GBP/USD closed on Wednesday, May 16, at 1.5930, which showed a 1% decline of the pound sterling over the reporting period. The rate low – 1.5887 – was registered on Wednesday, May 16; the rate high – 1.6182 – was reached on Thursday, May 10. The pound sterling was under pressure due to the quarterly report of the Bank of England released on Wednesday. The bank has lowered its forecast regarding the pace of economic growth of the British economy from 3.0% to 2.6%. It increases the likelihood of adopting additional measures intended to ease the monetary policy.

At closing of the European session on Wednesday, May 16, USD/JPY was 80.45, which signified a 1.1% decline of the yen over the reporting period. The rate low – 79.58 – was registered on Thursday, May 10, and the rate high – 80.55 – was registered on Wednesday, May 16.

Andrey Kiryanov
Head of Treasury Division