The U.S. currency weakened against 15 of its 16 most-traded counterparts as Asian stocks advanced and on expectations the European Central Bank (ECB) today will refrain from lowering interest rates amid signs the global economy is recovering.
The USD dropped toward a 2 week low against the EUR as signs the global economy is rebounding spurred demand for higher-yielding assets.
The greenback traded at $1.4753 against the EUR from $1.4691 yesterday. The U.S. currency depreciated earlier this week on concern the Federal Reserve will be slower to raise Interest Rates than policy makers in other nations. The Federal Reserve may start raising its benchmark rate in the 3rd quarter of 2010, according to analysts' forecasts. Expectations that U.S. Interest rates will stay low as the economy tries to pull out of recession mean the Dollar could be the funding currency of choice for carry trades.
The decline in the U.S. Dollar is closely linked to the Federal Reserve's unprecedented efforts to lift the U.S. economy out of the worst recession since the Great Depression. With its target Interest Rate near zero percent and the combination of fiscal stimulus and special Fed lending programs pumping trillions of Dollars into the U.S. economy, the U.S. government is effectively printing more U.S. Dollars. And as a result investors are wary of keeping too large a portion of their assets in U.S Dollars.