More bad news about the dollar. Just today it has depreciated further to “three-year lows.” This has resulted in US crude oil jumping to a 2 ½ year high and rising Asian stocks “as investors bet that the easy U.S. monetary policy will continue to drive money to riskier assets.” It is anticipated that the Bank of Japan will stick with its “ultra-loose monetary policy” and even go looser if there are further repercussions from the country’s tsunami disaster. In addition, the two largest banks in the country are maintaining close-to-zero interest rates which will probably result in investors still using the dollar and yen “as funding currencies to buy higher-yielding assets, commodities and equities.”
It seems that those playing the markets see it as a logical move to fund investment assets with the dollar “since U.S. interest rates are likely to stay low for a while.” Still, it looks like there will be a thinning of trading volume in Japan’s stock markets with the upcoming Golden Week holidays. There is also an anticipation of a further increase in the Nikkei “if earnings continue to impress the market.”
Dollar Index Drop
The .DXY (dollar index) dropped substantially to 72.878. This is lower than it’s been since July 2008. But this didn’t seem to impact the Euro which actually peaked to a “16-month high of $1.4878…. while the Australian dollar touched a post-float high of $1.0948.”
So while there is some good news in the markets, there is still quite a road to recovery ahead. The dollar will ebb and flow but right now it’s having a pretty bad time. Still, with markets so volatile, that could reverse at any time.
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