Dollar still losing favour on currency markets

THERE have been some fairly fierce moves on currency markets. Most notable has been the marked deterioration in sentiment towards the dollar.

Since mid October it has fallen by nearly 5% against the euro, 5.2% against sterling and 1.8% against the yen. On a broad trade weighted basis it has depreciated by almost 2%. Attempted recoveries have proved to be short-lived.

With the euro breaking through support at a number of key resistance points, markets are now debating the likelihood of a move by dollar/euro to $1.40. Comments from the ECB suggest that it is relatively comfortable with the level of the euro versus the dollar. The eurozone is much better placed to deal with the currency’s appreciation compared to when it last traded through the $1.32 level in May 2005.