The greenback has managed to claw back early losses as it sank to $1.5874 against sterling, $1.3641 against the single currency and a two year low against the Australian dollar.
The ailing dollar fell this morning as sliding US treasury yields and mounting fears of a second round of quantitative easing pushed the currency lower. With a continuous stream of weak economic data and Q4 predicted to be very slow globally, it’s beginning to look like the only thing that may shift focus away from the greenback would be a European nation defaulting on its debt (which is looking increasingly unlikely).
Sterling felt the full force of panic over potential monetary easing measures as Adam Posen, a member of the MPC, declared that the Bank of England may even need to go as far as buying up corporate debt to guard from the double dip recession.
In other news, the House of Representatives is poised to pass legislation to pressure China to let its currency appreciate more freely. A brave move by the Americans as the Chinese Central Bank holds over a trillion dollars in notes alone. A sell off of dollars from China could send the US currency into freefall (at least the US export market might help them through these dark days?).
Tom Hampton
Analyst Caxton FX
