Dollar to Resume Long Term Decline
Many currency experts expect the US dollar to resume its long term decline against other major currencies. The easing of Dubai World fears among investors and financial institutions and an unexpected rise in U.S. pending home resales has spurred a rise in risk sentiment in stock and currency markets. On Tuesday the dollar fell against the euro for the second straight day and the Canadian dollar rose as record gold prices and rising oil prices pushed the commodity linked currency higher. Raw material exports account for more than half of Canada’s export revenues. Amelia Bourdeau of UBS AG stated, “It’s more the type of risk seeking we saw in September and October. There are investors who want to close out these risk-seeking positions and investors who want to get in. So they wait for that pullback and get in.”
Pound Extends Gains Against Dollar
The US dollar experienced its fifth straight monthly drop and fell 1.9% in November. The British pound extended gains made against the dollar on Tuesday and traded at $1.6620 after hitting $1.6647 on Tuesday. Bank of England chief economist Spencer Dale said that the UK appeared to be exiting the recession but cautioned that credit is likely to remain tight. Traders and investors are sitting on the sidelines in advance of the European Central Bank meeting on Thursday. Both groups are also waiting for US non farm payroll figures due Friday.
BOJ Attempts to Stem Yen’s Appreciation
The Japanese yen declined due to a rise in risk appetite and concerns about possible actions by the Bank of Japan. After an emergency meeting on Tuesday the Bank of Japan said it would provide 10 trillion yen ($115 billion USD) in three month funds at a rate of 0.1% in an attempt to stem deflation and shore up the ailing Japanese economy. The Japanese government is trying to stem the yen’s appreciation which is hurting major Japanese exporters.
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