Dollar held back by Fed

The dollar remained close to a seven-month trough versus a number of major currencies at the beginning of the week, and was expected to remain pressurised on the back of the Federal Reserve’s decision to launch monetary stimulus to prop up the US economy.

The central bank’s announcement last week that it was to carry out a third wave of quantitative easing to purchase $40bn per month of mortgage debt until the US employment market improved has led to investors snapping up riskier assets and has had a negative impact on the greenback.

The dollar index was at 78.802, having dropped to as low as 78.601 at the end of last week, its lowest since February. It has now lost six per cent since hitting a two-year peak in July. Credit Agricole’s Mitul Kotecha said that he feels the risk rally is likely to continue, at least until investors turn their attention to concerns over the global economic outlook.

Meanwhile, the euro was last seen steady at $1.3128, close to its four-month peak of $1.3168 which it climbed to on Friday. It has now risen by roughly nine per cent since spiralling to a two-year trough of $1.2042 in July. The single currency’s dramatic change in fortunes of late has been driven by the European Central Bank’s decision to reduce the borrowing costs of indebted European states.