Dollar extends its decline

The decline in the dollar continues as the greenback hits its lowest level in around a month. However, investors are now focused on economic data to be released by China later. Any signs that the world’s second-largest economy is slowing down could offer support to the dollar.

The dollar index fell 0.3 per cent on Tuesday and is currently trading at 82.014. Since the beginning of the month the index has fallen around 3 per cent. The decline of the greenback follows confirmation by Ben Bernanke, chairman of the Federal Reserve, that interest rates will remain low for the foreseeable future, even though the central bank may start to rein in asset purchasing.

The dollar has dropped below 100 yen, something that has helped the euro to climb to a high of $1.3239. The single currency is also riding a two-month peak of 132.47 yen.

Analysts are not expecting the dollar to continue to languish, especially against recession ravaged currencies like the euro and the pound.

Another winner against the weaker US dollar is the Aussie dollar. Earlier in July the Aussie dropped as low as $0.8998, but has managed to pull back to 93 cents. Focus will now be on consumer inflation data coming out of Australia. Any indication that there could be an interest rate cut will put pressure back on the Aussie.