Thursday, June 18, 2009

New Outlook for Investors

For a second day the dollar declined against major currencies on Wednesday after U.S. inflation data cut speculation on the fact that the Federal Reserve would raise interest rates soon.
An increase in stock prices and better economic data in recent months had led investors to think that the U.S. recession was moving to an end and that interest rates may need to rise by year end. "The latest inflation data has obviously reminded market participants that inflation is still not as much of a worry right now," said Samarjit Shankar, director of global foreign exchange strategy at the Bank of New York Mellon in Boston.

He also added: “The market has had to scale back its expectations for a Fed rate hike. That has obviously taken away some element of support for the dollar," he added.

Higher interest rates in the U.S. compared to Europe tend to attract investment flows into the U.S. dollar. Brian Dolan, chief currency strategist at in Bedminster, New Jersey. said that observe dollar weakness because the idea is that inflation is not clear right now and that is seen as a positive in terms of the bullish outlook and risk appetite.

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