On Thursday the dollar has gained against the euro after central banks said they will scale back some emergency programs by which trillions of dollars have been injected into banks as financial markets stabilize.
Sterling reached near a six-month low against Euro
Sterling also reached near a six-month low against the euro after Bank of England Governor Mervyn King has told a regional British newspaper that a weak pound was been helping UK exporters and the economy cope with a sharp downturn.
US Dollar demand has increased in Carry Trades
Low interest rates as well as the vast amounts of money that has been pumped into the global economy have put pressure on the U.S. dollar and increased its appeal for use in carry trades.
What is a carry trade?
In a carry trade, an investor borrows in a low interest rate currency and the funds are used by it to invest in higher-yielding assets in other countries.
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by R. MAK. on September 9, 2009 · 0 comments
in Currency Trade,Forex Market,Forex News,Forex trading,News,Stock Trading,Trading,currency,investment,stock exchange
On Wednesday the U.S. dollar fell, as investors moved to riskier assets like stocks and higher-yielding currencies and now it has touched new low levels for 2009 against major currencies.
Hopes for economic recovery has been supported by the rally in European and U.S. stocks, and together with the fall in U.S. dollar borrowing costs, it has encouraged investors to look for higher returns around the world.
Concerns over the dollar’s long-term status has been renewed as the world’s reserve currency and options-related euro buying also contributed to the sell-off, and that has been started on Tuesday.
Boris Schlossberg, who is a director for currency research at GFT Forex in New York has said that the dollar trade is ultimately a risk trade. What it means is that, as risk appetite improves, the dollar gets hurt. Further he said that the lower move has been initiated once a key technical barrier on euro/dollar was lifted late on Friday. Large options contracts expired and this has let the traders to push the euro through $1.45 and $1.46 is the target now. The rise in stocks and commodities are making contribution to the move.
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