Massachusetts, China Send U.S. Dollar Surging on the Spot Forex Market

The U.S. dollar is rallying solidly today on the spot forex market. Spread bets and CFDs should consider that politics is the driving force behind the greenback's strength on the currency market today. 

One of the big factors in risk aversion is the monetary policy statement out of China. Currency traders are concerned that the Chinese government is tightening policy as speculation abounds that officials have asked banks to stop lending. Risk aversion, therefore, is high as investors look for capital preservation and safety.

Another issue providing a boost for the U.S. dollar on the spot forex market is the Republican win in Massachusetts. GFT's Kathy Lien explains in FX360 why this is so important to the U.S. dollar:

[T]he Republican win in Massachusetts is extremely dollar positive because it deals a big setback to the health care bill. At a cost of more than $1 trillion, less government spending would help to reduce the U.S. budget deficit.

Republican Scott brown won the Senate seat vacated by the late Edward Kennedy, bringing the first GOP Senator from the notoriously liberal state in 40 years.

With all of this going on, it is little surprise that currency traders barely paid attention to mixed economic reports this morning related to housing market data and CPI.