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Bullish Dollar on Rate Bets, Stocks Downmarket

Written By Trading Forex News on Wednesday, December 9, 2009 | 8:18 AM

The U.S. dollar reached the highest level in a month versus the European common currency and also gained versus allhigh-yielding options among currencies as pessimism returned to stock markets and bets that interest rates in the U.S. will be lifted rose.

After an employment report that shifted market sentiment last Friday, the dollar found support to rally strongly versus currencies linked to commodities like the Australian dollar, and emergent market options, like the Brazilian real, both which have risen more than 20 percent versus the greenback in 2009. Equities markets went down today as Dubai shares touched the lowest level since July, and speculations that low borrowing costs throughout the world may create a new asset bubble brought risk aversion to the highest levels this month, as speculations suggest that the bearish days for the greenback may be ending, since odds that interest rates can be hiked by the Federal Reserve any time sooner than previously expected emerged after Friday’s positive report.

A risk aversion wave started in the Middle East combined with a new positive sentiment towards the interest rate outlook in the U.S. is fueling the greenback’s appeal in trading markets in a way it hasn’t been for months, and the dollar may advance further if such sentiment gains confidence among traders.

EUR/USD traded at 1.4806 as of 11:15 GMT from an opening rate of 1.4877 yesterday. AUD/USD traded at 0.9084 from 0.9136.

If you want to comment on the U.S. dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

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