The dollar hovered near a seven-month low versus a basket of currencies on Monday, and was seen as likely to stay under pressure after the US Federal Reserve embarked on an aggressive monetary stimulus last week. The dollar index stood at 78.802, having fallen as far as 78.601 on Friday, a level unseen since late February. I t has shed some 6 percent from a two-year high of 84.100 in July.
"I don't see any reason why the risk rally won't continue," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong. One caveat is that investors may eventually turn their focus to worries about the outlook for global economic growth, Kotecha added. "But for now, I think there's no reason to go against this (risk rally) and that means probably more dollar pressure."
The euro held steady at $1.31 28, hovering near a four-month high a round $1.3169 hit on Friday on trading platform EBS. It has gained a bout 6 percent from a two-year low of $1.2042 plumbed in July. "The euro looks firm, there is no question about that," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
The dramatic bounce in the currency also reflected relief after the European Central Bank recently announced a long-awaited plan to help lower painfully high borrowing costs for stressed members. Markets are now waiting to see if Spain will ask for help to tackle its debt. Analysts said Madrid appeared to be paving the way for requesting such assistance after it said it would set clear deadlines for structural reforms by month-end.
The dollar has been in retreat since the Fed said on Thursday that it was launching its third round of quantitative easing. The median forecast among economists polled by Reuters is for the Fed to buy a total of $600 billion of bonds under the new stimulus programme. "Investors are likely to continue adding bearish dollar positions. In addition, risky assets including commodities and equities will remain well supported," analysts at BNP Paribas wrote in a report.
One such currency, the Australian dollar, slipped 0. 2 percent to $1.052 6, backing away from a six-month high of $1.0625 set on Friday. The US dollar eased 0. 1 percent against the yen to 78.2 7 yen, but remained above a seven-month low of 77.13 yen hit on Thursday after the Fed unveiled its monetary stimulus.
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