RTTNews - The dollar was battered on Monday, dropping to a yearly low against a basket of key currencies as stocks soared and traders went all-in on the prospect of a global economic recovery.
Speculation that the recession is in its final days has intensified risk appetite, crippling the dollar over the past few weeks.
With the S&P rising above 1000 and the Dow up more than 100 points as of mid-day, the dollar plunged through support to touch levels not seen since last fall versus the higher-yielding euro and sterling.
Its been a dramatic decline these past few months for the dollar. Earlier this year, the buck was sitting pretty during the throes of recession anxiety, as traders flocked to the reserve currency as a safe haven.
On Monday, the dollar plunged to 1.4444 versus the euro, hitting its lowest level in nearly a year. With the steep decline, the dollar has dropped more than 4 cents from a monthly high set less than a week ago.
The bottom also fell out on the dollar versus the surging sterling. As earnings results from London showed that Britain's big banks were in good shape, the dollar plunged to 1.6986, its lowest since October 2008. Back in January, the dollar was at two-decade high near 1.3500.
In what appears to be an inevitable move back to parity with the resource-linked Canadian loonie, the dollar dropped to another yearly low of C$1.0675.
Monday, Nouriel Roubini, the New York University economist, known for predicting the financial crisis, reportedly said he expects commodity price to increase further next year with rising economic growth, giving resource-linked currencies a boost.
While the Institute for Supply Management released a report on Monday showing a continued contraction in manufacturing activity in July, the report also showed notable improvements in new orders and production.
The ISM said its index of activity in the manufacturing sector rose to 48.9 in July from 44.8 in June.
Meanwhile, spending on building projects unexpectedly rose in June, according to new government statistics released Monday. An increase in government spending helped offset a mild retreat from the private sector.
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