US Dollar Declines to New Lows

US Dollar dominates the markets this morning as we see the supposed ‘most important currency in the world’ drop to its lowest level against a basket of currencies as expectations of U.S. increasing their easing measures kept investors piling on bets against the greenback.

The Australian dollar was one of the greatest beneficiaries as it boasts the highest yield among major currencies and soared to a 28 year peak versus USD at 0.9983 following the investors mass dumping of the dollar as the Federal Reserve look to start the money printing, possibly as soon as next month.

Euro jumped over 1% overnight and broke not just above the eight month high of $1.40 but continued this morning to above $1.41. This move caught some market watchers who have been expecting more consolidation by surprise as it triggered stops at just above $1.40, which led to continued dollar weakness.

Downside pressure intensified after Singapore announces that they are widening the trading bands of its currency, allowing it to hit a new record high. The monetary authority also announced that it would maintain the modest and gradual appreciation of the currency.

Sterling continues to be the one currency that is struggling to break into higher ground against most currencies, as we continue to see drops against the majors.

This weakness in the UK economy follows increasing speculation the Bank of England will also follow the Fed and introduce fresh quantitative easing measures. When they sneeze, we catch a cold springs to mind!

Labour market data yesterday showed that in the UK the number of people claiming unemployment benefits rose in September for a second consecutive month. This led to Sterling hitting a five month low against the euro.

The pound has however benefitted largely from the decline of the dollar, with after much trying over the last few days the level of $1.60 has been broken during early morning trading Thursday. Buyers of Cable are now able to secure prices towards the very best we have seen in nearly 18 months.

Events to watch today include the US trade report for August, which is expected to show a widening in the deficit. This could further weigh on the dollar. US PPI data for September meanwhile are not expected to raise any concerns in terms of price pressures.