The dollar slid to a 15-month low against the euro Wednesday as investors fled the safe haven currency on upbeat U.S. economic reports, while markets absorbed the U.S. Federal Reserve's indication that interest rates will remain at super-low levels for a while yet and that it was not overly concerned by the U.S. currency's decline.
The renewed slump in the dollar was driven largely by the publication Tuesday of the minutes to the Fed's last rate-setting meeting on Nov. 3-4. The Fed said at the time that it plans to keep interest rates at "exceptionally low levels" for an "extended period" -- currently the Fed funds rate stands at a range between zero and 0.25 percent -- and that the fall in the dollar had been "orderly."
Currency traders seized on the reference to the dollar as the Fed is usually wary of talking about changes in currency values. Though investors don't expect either the Fed or the European Central Bank to raise interest rates any time soon, the consensus is that the ECB will move first when the time comes -- the benchmark rate in Europe stands at 1 percent, already giving the euro a modest interest rate advantage.
Though many traders and analysts think the dollar has further to fall, they are well aware that the upcoming year-end may start to complicate matters as investors look to lock in profits made over the last 12 months by selling euros.
- Source (Web)
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