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Dollar Slides as Optimism Attracts Investors to Yield

July 18, 2009 at 12:00 by Jan Baros

US DollarThe U.S. dollar posted the weakest performance versus the euro since May as corporate earnings in North America came better-than-expect and U.S. government reports brought optimism to equities and currency markets, attracting investors to high-yielding options, consequently damping demand for the greenback.

The dollar posted significant losses versus most of the 16 main traded currencies after a U.S. housing starts report showed more than expected data added to a industrial production report that indicated more hopeful figures for the sector, creating the perfect pattern for risk appetite in financial markets, spurring demand for yield. The Canadian dollar climbed to a one-month high versus its U.S. counterpart, as the crude oil price supported the loonie. The euro reached a two-month high versus the greenback and may climb further, being
the same factors that moved the euro favorable to emergent-market currencies like the Brazilian real, and commodity-linked currencies like the Australian dollar.

This week, according to analysts, risk appetite moved a significant amount of traders back to high-yielding positions, and leaving the yen and the greenback, currencies associated with safety in times of pessimism, as a unattractive choice, therefore with lowered rates. It is hard to determine how long risk appetite will be on the rise, but as long as this movement continues, the dollar rates will remain lowered.

EUR/USD ended the week at 1.4102 from 1.3955 in the beginning of the week. USD/CAD ended this week’s session at 1.1132 from 1.1615 five days previously.

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

One Response to “Dollar Slides as Optimism Attracts Investors to Yield”

  1. netsuke

    I would say most will be selling.

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