Dollar Down against Major Currencies on Easing Speculation

By TraderVox.com

Tradervox (Dublin) – The US dollar fell against the euro and the yen as Federal Reserve commenced on a meeting to discuss the monetary policy as speculation the Fed may change the current monetary policy to accommodate further stimulus measures rose in the market. The euro has continued with its gain as the G20 members meet in Mexico to focus on how to respond to the crisis in Europe. The euro advance has been limited by the enormous debt crisis in the region as Spain’s borrowing cost continues to rise. The Australian dollar also advanced against the US dollar for the fourth day after reports indicated that the recent cut in interest rate by the RBA was as a result of finely balanced discussions.

According to Jefferies & Co. and JPMorgan Chase & Co. the Fed might extend Operation Twist which is supposed to expire this month. However, according to Yuki Sakasasi of Barclays Capital in New York, the mere extension of the Operation Twist Program will disappoint the market as investors are looking for something more aggressive. If this happens, the dollar might gain as investors sell off their risk. The US dollar has continued to decline after results from Greek Election showed that pro-bailout party won the election increasing risk appetite in the market.

The Group of 20 nations’ leaders meeting Los Cabos in Mexico has also initiated speculations that leaders will agree on a coordinated response to the euro crisis.  The IMF has already pledged $456 billion that will be used as “second line of defense” as it seeks to get a better solution to the crisis in Europe.

The dollar has dropped by 0.3 percent against the euro to trade at $1.2613 at the start of the London session after it had declined to as low as $1.2748 yesterday, which is the weakest since May 22. Against the yen, the US dollar dropped by 0.3 percent to exchange at 78.88 yen.

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