The dollar tumbles to a 15 month low as major economies continue with the stimul

The greenback fell to a 15-month low versus the currencies of major U.S. trading partners after a Group of developed/industrialized nations agreed to maintain their economic stimulus packages, encouraging investors to buy higher yielding assets. The euro strengthened against the dollar after Germany’s exports rose to 0.9% contradicting analyst’s expectations of a decline below the previous month’s figure. The Dollar Index which is used to track the greenback against the other major currencies that include the Euro, Yen and British pound dropped 1 percent to 75.063, from 75.820 on Nov the 6th. The Index touched 74.930, the lowest level since August 2008. Overall the index has lost 7.7 percent since the beginning of the year. The U.S’s unemployment rate jumped in October to 10.2 percent, the highest since 1983. The Unemployment rate “is disconcerting,” said Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG, the world’s second-largest currency trader. “It raises questions whether the Fed will wait even longer.” The EUR/USD is currently trading at $1.4995 as of 20:06pm, GMT with a bullish trend.

The British pound gained considerably against a broadly weaker dollar on Monday, following a rally in higher risk currencies and the equity markets as in investors count on a global recovery with lower unemployment by mid-2010. Sterling has been much firmer since the Bank of England’s increase of quantitative easing by 25 billion pounds, in what investors believed would have been 50 billion it is also seen as the final stimulus package the BOE will announce. Risk appetite was reflected in a rise in oil prices of more than $1 per barrel and by gains in equities, with UK shares gaining 1.7 percent and on course for a fourth consecutive day of gains. Data collected from the Commodity Futures Trading Commission on Friday showed speculators had decreased bets against the British pound last week. Net short sterling positions fell to 18,904 contracts from 31,432 contracts a week prior. The GBP/USD is currently trading at $1.6750 as of 21:05pm, GMT with a bullish trend.

The International Monetary Fund signaled record low U.S. interest rates are funding global “carry trades” and the dollar is still overvalued as concerns mount that new financial imbalances are forming. “There are indications that the U.S. dollar is now serving as the funding currency for carry trades,” the IMF said in a report published on Nov the 7th. “These trades may be contributing to upward pressure on the euro and some emerging-economy currencies.” In a carry trade, investors borrow in countries with low interest rates to invest in higher-yielding assets.
Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. The AUD/USD is currently trading at 0.9295 as of 21:31pm, GMT with a bearish trend.

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