Dollar Traders on Edge as They Suspect Fed is Wrong

It has taken some time for the fundamentals of the dollar to work its way to the front page. After the pounding it has taken over the past month, it is certainly drawing attention now.  Just remember gold moves in the opposite direction of the dollar.

Source: Financial Times

Currency markets will open on edge on Monday after last week’s sharp decline in the dollar, with traders looking to new economic data and the tone from the European Central Bank for fresh reasons to trade on the dollar.

The latest bout of dollar weakness has occurred as currency markets have developed a growing belief that the US economy is in worse shape than the Federal Reserve claims. They have also been encouraged to buy the euro by the lack of concern expressed so far by ECB officials about the rise of the single currency.

On a trade-weighted basis, the dollar has declined nearly 4 per cent since the middle of October, with more than half that fall being recorded since November 20.

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