The market rally continues on the expense of greenback, where the dollar index fell to its lowest since 2008 as investors continued to eye higher yielding assets over the dollar with the Feds withholding their pledge for low rates and a loose monetary policy.
The dollar index that tracks greenback's performance against six major US trading partners' currencies dropped to the lows of 72.87 from the high of 73.37 and recovered now to trade around 73.18 after the heavy selling on the dollar against its major counterparts.
Rate differentials and bets on other central banks to raise rates much before the feds kept the dollar week to the advantage of its major trading partners. The shining star remains the Australian dollar, not only bolstered by the dollar but by its own merits.
Aussie rallied to a new record at 1.0946 as the prudent feds opposed the expected hawkish stance from the RBA after inflation rallied at the fastest pace in five years. Commodities rally and especially gold continues to be further support for aussie and aiming higher with eyes on the RBA next week with expectations for a rate hike!
As for the euro, the common currency stretched higher to 1.4881 and declined again to trade now around 1.4801 above the lows at 1.4766 where the negative momentum pressured the pair lower yet still likely to move higher once the market jitters ease with the US GDP for now eyeing to breach the psychological 1.50 areas.
The rally did not end there, where sterling surged to the high of 1.6745 the highest for sterling since November 2009. The pound rose on prospects for tightening from the BoE as well before the Feds, where the expansion reported yesterday eased some of the fears over delaying the hike extensively by the BoE.
Sill, the focus now remains on the US with the GDP on queue for release now. The US economic growth is expected ongoing and rather moderate as the feds called yesterday. The data today are expected to show the expansion eased to 2.0% in the first quarter compared to 3.1% in the last three months of 2010.
We expect more volatility and fluctuations to be seen due to the heavy momentum negativity seen across the board after the rally, yet the dollar's course is still south and the market is on its bullish run!