U.S Dollar recovers a bit from record low vs. euro, yen stumble

The U.S dollar reached the level 1.4966 against the euro, all time low on Friday on speculative trading. On Monday the currency pair EUR/USD corrected down as market players trimmed some of their hefty bets against the greenback, even as the U.S. economy's troubles keep investors sour on U.S. assets.

In spite of positive move the dollar trend remains bearish, analyst believe that EUR/USD will reach the 1.5$ level and finally break the psychological resistance in the short term as long as the sub prime crises and credit crunch continue to affect strongly on the U.S financial market.

The yen edged away from a 2-1/2-year peak against the dollar as stronger equity markets spurred some market players to tiptoe back into carry trades, which involve borrowing the low-yielding Japanese currency to buy higher-yielding currencies.

The yen got a brief boost from a Nikkei newspaper report that China's sovereign wealth fund, which manages about $200 billion of the country's foreign reserves, is expected to invest in Japanese stocks. The fund, China Investment Corp, later said it had not yet made a decision on whether to invest in Japan or any other market.

So far in November the dollar has dropped nearly 6 percent against the yen and is poised for its biggest one-month fall since March 2000. The worsening credit crunch and the hit to stocks have driven the yen higher as market players rushed to reverse carry trades.

The worries about the U.S. economy and expectations for repeated Federal Reserve rate cuts have caused the dollar's broad tumble to accelerate against low-yielding currencies such as the yen and Swiss franc.

ECB Executive Board Member Lorenzo Bini Smaghi said over the weekend that the current euro rate to the dollar does not exactly reflect economic fundamentals, and the U.S. economy is stronger than is reflected in the exchange rate.

The main focus today will be on the ECB President Jean-Claude Trichet speech in Mumbai at 11:00 GMT which can give a clue about farther monetary policy in euro zone, the ECB rate holds on 4.0%. Just to remind, Trichet repeated on Friday that he did not welcome brutal moves in currencies and highlighted comments from U.S. authorities that a strong dollar was in U.S. interests.

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