The US dollar is continuing to take its noise dive downward. The way it has been currently working is that as the market showed improvement, the dollar went down. Basically people were dumping money into treasury bonds and the US dollar while things were looking bad, but now that the market is showing a little life the money is moving out of the dollar and into other investments. This is leading to the dollar declining and continuing to go down.
I suspect there will be a correction once we see a correction in the stock market because this rally seems over the top. People seem to think things are improving, but companies are merely beating overly pessimistic forecasts. And really that is only a guess on performance. Outperforming a guess doesn’t mean things are good. Profits are down year over date.
July 28 (Bloomberg) — The Dollar Index fell to the lowest level this year as investors bought higher-yielding assets on speculation improved earnings signal the recession is easing. Aluminum rose for an 11th day, leading a rally in metals.
The U.S. currency declined as much as 0.9 percent versus the Australian dollar and 0.5 percent against the New Zealand dollar as of 10:48 a.m. in London. Stocks in Europe fluctuated between gains and losses, leaving the Dow Jones Stoxx 600 Index little changed. The MSCI World Index of 1,654 companies in 23 developed nations added 0.3 percent, extending the best winning streak since June 2003.
“With the risk-appetite switch jammed on, pressure on the dollar and the yen continues to mount,” Steve Pearson, a strategist at Bank of America Securities in London, wrote in a note today. “The move is being led by the commodity block.”
More than half of the 86 companies in Europe’s Dow Jones Stoxx 600 Index that reported results since July 8 have beaten analysts’ predictions, according to data compiled by Bloomberg. Companies in the Standard & Poor’s 500 Index have beaten estimates by an average of 11 percent. The U.S. economy probably shrank at a 1.5 percent pace in the second quarter, following a 5.5 percent contraction in the first three months, according to the median forecast of 66 economists surveyed by Bloomberg News.
The Dollar Index, which tracks the U.S. currency against six peers including the yen, pound and Swedish krona, fell to 78.315 today, the lowest level since Dec. 18.
