Posts Tagged ‘dollar’

Dollar weakness persists

Monday, June 1st, 2009

As mentioned in my previous post about the dollar, the current financial theme in the Forex market is dollar weakness.

As most bad economic news have already been priced into financial markets, and as these markets were created to anticipate, or speculate depending on whom you ask, the bullish market is continuing full steam at the start of June. The Dow Jones is up 211.11 points today.

The idea is that with so much Government intervention and liquidity creation by Central Banks globally, low interest rates and asset prices at much more affordable levels than they used to be, all is set for the next bull market.

This is not exactly a new bull market, but rather a current bull market as it started nearly three months ago. Only time will tell how powerful this rally is, but for now the bulls are dictating the direction of financial markets, with many new 6 months highs or lows reached today.

Rallying stock and bond markets, lower rates and liquidity injections make the dollar less attractive as an asset and this is the reason why a corollary of the current financial paradigm is dollar weakness.

Today’s rally was fueled by numbers showing that the US manufacturing sector was contracting at the lowest pace in recent history in addition to indications that commodity demand was strong in Asia.

The euro broke 1.42 in European time, to settle later around 141.60. The dollar was weak across the board and reached new 6 months intraday lows against most other currencies.

Based on the momentum theory, I forecast further dollar weakness in the near term.