TOKYO: The dollar hovered just above a 15-month low against a basket of currencies on Tuesday as investors looked to return to leveraged carry , supporting the euro and high-yielders. Expectations that US interest rates are likely to stay near zero for a while are encouraging investors to use the dollar to fund carry trades in higher-yielding assets. "With relatively solid stocks and higher commodity prices, and major events out of the way, market sentiment has shown a sense of relief," said Mitsuru Sahara, chief manager at currency derivatives trading at Bank of Tokyo-Mitsubishi UFJ. "The dollar is weakening broadly at a gradual pace but market volatility is low and there is no climate of returning to crisis," he said. An index of the dollar's performance against six major currencies edged up 0.1 percent to 75.110, having dropped about 1 percent the previous day to as low as 74.93, its weakest since August 2008. It was the biggest one-day fall since late July. "While dollar bulls are licking their wounds, equity and 'everything risky' investors are having a field day," said Matthew Strauss, a senior currency strategist at RBC Capital. "The bounce off 74.93 looks more like a pause than a corrective bounce." Some profit-taking emerged on the euro and yen crosses before a US market holiday on Wednesday but the currencies retained much of their gains made on Monday when the aftermath of a G20 meeting reinforced expectations for US rates to stay low for a while.
POSTED BY:
PALLAVI SINGH
PGDM III SEM
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