Published: Mon, 16 Mar 2009 20:37:21 +0100

Positive Market Sentiment Hurting U.S. Dollar

(CEP News) The U.S. dollar has been on a significant down trend in the last five days as risk appetite continues to support equity markets and high yield currencies.

Broad weakness was seen in the U.S. dollar Monday, which was down against most major currencies. The greenback was only showing gains against the Japanese yen today, and hit a session high of 98.64 JPY.

A late afternoon sell-off in equities is providing some support for the U.S. dollar as it continues to make gains against the euro. At the start of the North American session EUR/USD broke above 1.30, which is a key psychological barrier, but was unable to hold its gains. The cross is now trading in the mid-1.29 level ahead of the close.

Positive comments from Fed Chairman Ben Bernanke on Sunday, and Saturday's G20 meeting are supporting positive market sentiment. Bernanke appeared on CBS's 60 Minutes to discuss the economic crisis. He said the recession will likely end this year and the economy should recover in 2010.

The G20 also said they are committed to resolving the global recession. There was no clear plan released by the G20 in the statement released on Saturday. However, the member nations did pledge to increase funding to the IMF to help support faltering countries.

Neil Mellor, currency strategist at Bank of New York Mellon, is not optimistic that the recent positive sentiment will last. He said it could be only a matter of time before risk aversion grips markets and the U.S. dollar retraces its losses.

"Equity markets have been on a good run and the U.S. dollar has weakened," he said. "Right now it is all about how much risk tolerance the market has. I don't think we have seen an end to U.S.-dollar strength."

Euro/USD up 0.48 cents to 1.2976

USD/CAD down 0.07 cents to 1.2712

USD/Yen up 0.28 points to 98.30

GBP/USD up 0.82 cents to 1.4079

AUD/USD up 0.21 cents to 0.6603

Euro/Yen up 0.84 points to 127.55

Euro/GBP down 0.19 pence to 0.9217

GBP/CAD up 0.87 cents to 1.7895

CAD/Yen up 0.31 points to 77.33

Euro/CAD up 0.53 cents to 1.6495

The U.S. Dollar Index is down 0.48 points to 86.95

All data taken at 3:35 p.m. EDT.

By Neils Christensen, neilsc@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca