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Stocks Rally Push Dollar Down as World Economy Improves

May 29, 2009 at 12:35 by Andriy Moraru

U.S. dollarThe month of May posted the biggest losses for the U.S. currency in a one-year period against the euro, as equities markets continue to rise on optimism about improvements in the global economic situation.

The greenback lost ground against currencies around the world, and after South Korea affirmed that its state pension fund will sell Treasury bonds and diversify their investments to other assets, the Australian dollar and its New Zealand counterpart rose sharply against the North American currency. In Europe, the dollar lost ground against the pound after an unexpectedly favorable report on house pricing in the United Kingdom damped demand for refuge currencies. Among the main currencies, the Japanese yen also slid together with the dollar, also due to improved confidence in markets spurring risk appetite among traders.

The dollar and the yen are under pressure, according to financial consultants. Instability still penetrates several sectors of the world economy, but signs of recovery coming from multiple reports in different corners of the globe brought risk appetite to markets sooner than what most economists could predict, and currencies like the yen and the greenback, regarded as safe investments, are threatened in a new scenario of diminished risk aversion.

EUR/USD traded at 1.4030 from 1.3825, The GBP/USD currency pair also rose from 1.5935 to 1.6087. AUD/USD rallied to 0.7941 from 0.7800.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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