Tuesday, 2 Nov 2010

Dollar Tumbles against the Majors

The U.S dollar fell broadly against most of its major currency pairs as expected monetary easing from the Federal Reserve and a recent upturn in global economic data underpinned risk appetite. The USD is currently trading lower against the EUR by nearly 130 pips at 1.4020. It is also trading lower against the CHF and CAD.

The Australian dollar hit its highest level against the dollar since 1983 following the decision by the Reserve Bank of Australia to increase interest rates by 25 basis points to 4.75%. The decision to raise rates was made in order to fend of increasing inflation in the Australian economy that is picking up speed due to the profitable mining industry.

Tomorrow's ADP Non-Farm Employment Change and Federal Funds Rate releases are expected to have a strong impact on the U.S currency. Any result could be a surprise, and the Dollar could go either way as a result. In any case, traders are unsure how the market will react to today's data. A weak report could feed risk aversion, boost Treasuries and actually aid the U.S Dollar. Then again, a better than expected result might be seen as a sign of relative U.S. economic strength, and lift the Dollar. Or it could also encourage risk-taking and aid commodities and higher-yielding currencies at the Dollar's expense.