The Dollar falls as investors choose risk appetite over safety

The greenback fell to a one-year low against the euro and weakened versus the yen on speculation the global economic recovery is gathering strength, encouraging investors to buy higher-yielding assets. “The improving global picture tends to produce selling of the dollar,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “Our view is that the Fed won’t change its statement, so we’d be very surprised if they changed the reference to exceptionally low levels of the fed funds rate.” All 93 economists surveyed by Bloomberg said the Fed won’t change interest rates at its two-day meeting ending today. Chairman Ben Bernanke and his colleagues may discuss how to wind down purchases of mortgage-backed securities, analysts said. “You’ve obviously got some risks with the Fed, but unless they come out and surprise with being hawkish, which I don’t think they will, it’s another reason dollar bears will feel comfortable with their position,” said Phil Burke, chief foreign-exchange dealer at JPMorgan Chase Bank in Sydney. The EUR/USD is currently trading at $1.4803 as of 7:35am, London Time.

The British Pound rose against a broadly weaker dollar on Tuesday but remained under pressure against the euro on wariness ahead of Bank of England policy meeting minutes. The greenback fell after rallying the previous day as traders took profits on short dollar positions before a Federal Reserve policy setting meeting and a Group of 20 summit later this week "Sterling's rise is a reflection of dollar weakness," said Christian Lawrence, currency analyst at RBC Capital Markets. "A general tone of dollar weakness seems pretty strong." If the minutes show there was no discussion of a cut to the remuneration rate that would probably mean it is off the cards for the foreseeable future, putting the focus back on any suggestion of a further expansion in quantitative easing, something King was keen on last month. The GBP/USD is currently trading at $1.6375 as of 7:40am, London Time.

Japan's Ministry of Finance is likely to sell another 1.5 trillion yen ($16.46 billion) in government bonds this fiscal year to offset weak sales of debt to retail investors, the Nikkei business daily said on Wednesday. Deepening deflation in Japan has reinforced market expectations that the Bank of Japan will be in no hurry to raise interest rates from the current 0.10 percent, helping support demand for JGBs among institutional investors. The USD/JPY is currently trading at 90.90 as of 8:05am, London Time.

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