Posted on Tue, Nov. 10, 2009
NEW YORK - The dollar slid yesterday after officials from the world's leading economies agreed over the weekend to keep economic-stimulus measures intact for now.
The euro briefly pushed back up over $1.50 after finance ministers from the Group of 20 rich and developing countries steered clear from addressing the weakness of the U.S. currency against most of its competitors at a meeting over the weekend. They said they would not yet withdraw stimulus measures until they saw proof of sustainable global recovery.
The euro later traded at $1.4999 compared with $1.4835 late Friday, after briefly touching $1.5011. That means it took about a penny and a half more yesterday to buy one euro than it did Friday.
The U.S. dollar index, which measures the greenback against a basket of foreign currencies, fell more than 1 percent to its lowest in 15 months.
Investors around the world are seeing the dollar as weaker than other currencies because of low U.S. interest rates, and so they're using it for what's known as "carry trade," to finance purchases of investments in other countries. That trend takes the dollar down when those purchases are made.
In a note prepared for the meeting over the weekend, the International Monetary Fund said that the dollar was "now serving as the funding currency for carry trades" and that these trades may be "contributing to upward pressure on the euro."
"Early indications suggest further dollar declines, as the euro broke above last week's highs at $1.4910 and $1.4920 and now looks set to retest the highs of last month at $1.5065 and $1.5070," CMC Markets analyst Michael Hewson said.
There are little economic data expected this week to give markets direction, but the dollar is likely to remain pressured due to interest-rate differentials, momentum, and "lack of official concern," Brown Brothers Harriman currency analysts wrote in a note to investors yesterday.
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