Thursday November 4, 2010 - 14:13:31 GMT
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Forex Hound - www.forexhound.com
Fresh Liquidity Driving Greenback Lower
This morning the Dollar is getting pounded once again.
Simply stated, new liquidity means a weaker Dollar. With the exception of the
December Japanese Yen, the Greenback is trading weaker across the board.
Traders are buying the December Euro and December British
Pound for economic reasons. The European Central Bank is considering
withdrawing stimulus while the U.S. Federal Reserve is adding liquidity. This
scenario favors a long Euro. The U.K.
economy seems to have stabilized and it seems to have absorbed the recent new
austerity measures and tax hikes.
The fresh money pumped into the system from the Fed is
flowing into stocks and helping to boost Dollar priced commodities. This is
driving up demand for risky currencies such as the December Canadian Dollar and
December Australian Dollar. Although the Bank of Canada recently refrained from
hiking interest rates, the huge amount of natural resources this country holds
is helping to support the currency. Higher gold and crude oil is translating
into support for the Loonie. Earlier
this week, the Reserve Bank of Australia
raised its benchmark interest rate, increasing the interest rate differential
between the U.S. and Australia,
making this currency an attractive buy as investors chase the higher yield.
Today looks like a lesson in Forex 101 as new liquidity has
breathed fresh life into the Dollarâ€™s downtrend. Traders are chasing the higher
yields that the U.S.
canâ€™t deliver at this time.
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