Dollar Pressured For Last Two Weeks

The US dollar has been getting slammed for the last two weeks in global forex currency trading. Last week there were concerns about the triple A credit rating of the US being downgraded which sent the dollar to a five month low against the euro. Fears of a downgrade faded after Moody’s Investor Service affirmed the credit rating of the US.  The euro to dollar rate rose to $1.41 for the first time in 2009 as risk appetite rose on hopes that the global recession is easing.

Investors Worry About Massive US Deficits

The record $1.8 trillion U.S. budget deficit added to investor worries and affected currency exchange rates globally. Earlier in the year the Chinese expressed concern about mounting US debt and recently the South Korean South Korea’s National Pension Service announced a reduction in the purchase of US treasuries adding to the dollar’s woes. Global stock markets posted 2009 highs dimming the safe haven luster of dollar denominated assets.

Expert Predicts ‘Tepid’ Recovery

Some currency analysts believe that as risk appetite rises the dollar may react in a negative manner to dismal economic data. Boris Schlossberg of GFT stated, “The dollar is being slapped around. The forex market is now getting realistic about this (U.S.) recovery.” Schlossberg also predicted a “tepid” recovery. On Friday the DXY was down 1.4% the lowest since December and is down 6% for the month, the largest monthly fall since 1985.

Pound Posts Largest Monthly Gain in 25 Years

The pound to dollar rate posted its largest monthly gain in almost 25 years and last traded at $1.6169. Higher house prices and higher consumer sentiment in the UK were credited for the pound’s rebound. A survey by Merrill Lynch & Co revealed that 25% of the 220 fund managers surveyed thought the pound was undervalued.

Global currency exchange rates have been affected largely by the ‘green shoots’ recovery theory. Rising stocks have reinforced this belief among investors with a resulting rise in risk sentiment.