Monday, 13 Dec 2010

US Dollar Experiences Sharp Decline vs. Majors

U.S. deficit concerns returned to the forefront of foreign exchange trading on Monday, pushing the dollar lower after Moody's said a tax-cut deal reached last week by the White House and Republicans could shift its outlook on the United States' top credit rating.

A U.S. tax cut deal could swell the budget deficit at a time when the Federal Reserve is committed to accommodative monetary policy. As the economy appears to be recovering, investor focus has shifted back to the budget deficit.

Volume was lower than usual as the holidays approached, and traders said the euro could run into resistance. Some said the market was wary of getting stretched ahead of a European Union summit this week that some hope will result in a permanent support mechanism for troubled euro zone countries.