Dollar Pressured by Rising Risk Appetite

Rising risk appetite has pressured the US dollar and is affecting global currency exchange rates across the board. The dollar has fallen to its lowest this year as investors pursue higher yielding investments and currencies. The dollar fell to a five month low and is well on its way to a monthly drop of 6%, the largest monthly decline since 1985. The US jobs report due Friday is expected to reinforce the view that the worst of the global downturn may be over. Kathy Lien of GFT Forex stated, “The tide is turning and we are beginning to see more signs of stability in the U.S. and global economy. We’re probably looking forward to more positive data from the U.S. economy, which will ease safe-haven flows and continue to drive the dollar lower.”

Bleak Future for the Dollar

The signs of improvement in the global economy are bad news for the dollar which is seen as a safe haven currency in troubled economic times along with the Japanese yen. Last Friday the euro to dollar exchange rate reached its highest this year at $1.4168. The pound gained 10% against the dollar in May, the largest monthly gain since 1985. Many currency strategists believe that the future of the dollar looks bleak in both the near term and long term.

Mounting US Deficits

Investor concerns about mounting US deficits have pressured the dollar and The US job report due this Friday is expected to show an unemployment rate of 9.2%. Fears of a possible credit downgrade for the US were resolved after Moody’s Investor Service said that the triple A rating of the US is secure. This week’s meetings of several banks in the Euro Zone, Canada and the UK are expected to affect currency exchange rates on global forex markets.

At the present time it doesn’t look good for the greenback and most currency experts expect this to continue as US deficits mount and unemployment surges.