Bad News For the Dollar

The US dollar has declined the most in a month against the euro and hit a 14 month low last week as investors and currency traders bet that the Federal Reserve will be behind the curve in raising interest rates. Dale Thomas of Insight Investment Management stated, “There’s no good news for the dollar. The underlying trend is still for a gradual recovery of the global economy and a weak dollar.” Thomas also said the US dollar will remain a “funding currency” for investors to purchase higher yielding assets.

Japan’s Finance Minister Speaks

The dollar vs. euro fell 1.2% to $1.4905 and the greenback hit $1.4968, the lowest since August 2008. The Japanese yen fell 1.2% against the dollar trading at 90.89> the yen fell against all 16 of the most traded currencies as investors and traders speculated that Japanese investors will send currency out of the country for higher returns and that the Japanese government will not support a strong currency. Japanese Finance Minister Hirohisa Fujii stated, “The shift in Japanese currency policy has broken the relationship between the yen and risk, but the boost to sentiment already looks to be fading.” He also told reporters that governments are responsible for the stability of their currencies and currencies “need to reflect the strength” of economies.

Aussie Dollar On Track For Parity With Greenback

The Australian dollar rose 1.2% last week and hit 92.70 U.S. cents and some currency experts and banks including Barclays Capital, BNP Paribas SA, Morgan Stanley and St. George Bank Ltd. Believe the Aussie dollar could reach parity with the US dollar. Australia’s Reserve Bank Governor Glenn Stevens became the first G20 banker to raise rates when he raised the overnight cash target to 3.25% a quarter percentage point increase.

BOE to Suspend Asset Purchases

The pound rose 3.2% after the Bank of England is likely to suspend asset purchase programs. The pound traded at $1.6356, the largest advance since May. According to Deutsche Bank AG, the world’s largest currency trader, the pound is ‘undervalued.’ The upcoming meeting of euro zone finance ministers in Luxembourg on Oct. 19 will address the euro’s rise against the US dollar and will likely affect currency exchange rates.

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