11 March 2009

Citigroup Announcement Affects US Dollar

Citigroup's announcement that their first quarter results show healthy profit have caused ripples through the market. The FTSE, Dow Jones and Nasdaq all rocketed and the company's shares increased.

The news also had an affect on the currency exchange market - the US dollar was weakened as a result. In the last half a year, it has been a stalwart of strength against most major currencies, and will probably regain this strength fairly soon.

But do the Americans want this? Surely a weaker currency might aid the US, allowing local demand to increase and foreign investment too? Right now, while it is cheap for Americans to travel and buy foreign mergers, it is suffering. Nobody's spending money and certainly not traveling. Nobody wants to buy US branches, and exports are suffering. McDonald's and Burger King have said international sales are down.

A period of weakness might be healthy, but it isn't going to happen until confidence - or at least some confidence - is restored in the financial sector and the economy as a whole. Until then, US companies face some hard knocks as quarterly results are announced.

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