Dollar Hits One Year Low

The US dollar fell to its weakest level in almost a year against the euro. Rising stocks and increased US industrial production are seen as signs of recovery causing forex traders to sell the dollar in favor of higher yielding currencies. The Kiwi dollar posted the biggest gains vs. the US dollar and investors were attracted by the three-month deposit rate that is almost ten times higher than US deposit rates. Lauren Rosborough of Westpac Banking Corp. stated, “We are in an environment that is constructive for growth. It is positive for high- yielding, high-beta currencies. We are seeing evidence that cash is moving out of banks.”

Rate Comparisons

In yesterdays trading the dollar to euro exchange rate fell 0.5% to $1.4724 the lowest since September, 25th, 2008. The Japanese yen gained 0.1% against the US dollar trading at 90.95. The Kiwi dollar rose an astounding 1.5% to $71.53. The three month deposit rate in New Zealand is 2.73% compared with US rates of 0.28% and Japanese rates of 0.38%. The Aussie dollar rose 1.3 to $87.49 and offers a three month rate of 2.93%. Brian Dolan of FOREX.com stated, “The dollar is on its back heels. Until we get a setback in the risk markets, the dollar looks to remain under pressure.”

Rising Stocks Pressure Dollar

Stock gains put downward pressure on the dollar and pared safe haven demand. The Standard and Poor’s 500 Index rose 1.4 % and the DXY which tracks the US Dollar against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish Krona fell 0.5% to 76.151, the lowest since September, 23rd, 2008. Rising risk appetite has damaged the dollar on forex markets. Michael Woolfolk of BNY Mellon stated, “The trend is for continued improvement in risk appetite. The dollar remains under
pressure.”

It is clear that increased risk sentiment is putting the US dollar under pressure. Massive US deficits are also a concern among investors.