Relief for the U.S. Dollar Not Coming in the Near Future

Most currency experts believe the fall of the U.S. dollar is far from over, and it has a ways to go before it reaches bottom.

There are many reasons for the decline of the dollar, and many consequences as well.

Here's some of today's stories talking about what they are:

Myriad of factors behind dollar's sudden drop

Momentum trading, the break of key options barriers and technical levels, and crosscurrents with oil and other commodities all played a role in beating down the buck.

Take, for example, momentum trades, which are market bets made simply on direction rather than fundamentals or intrinsic values. Analysts say the dollar's rapid rise against the euro this week was due in part to this strategy.

"When prices roll higher -- or lower -- and momentum kicks in, the trend attracts fresh interest from momentum traders and models," said Andrew Wilkinson, senior market analyst at Interactive Brokers.

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Dollar: It will only get worse

Despite all the pain the U.S. dollar has endured in recent days, the greenback may still have further to fall before seeing any sort of relief, according to currency experts.

Driving much of the dollar's decline this week were tepid remarks about the U.S. economy by Federal Reserve Chairman Ben Bernanke, who hinted that the central bank would cut interest rates once again at the Fed's March meeting.

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Euro breaches $1.50 barrier, What's it mean for Sterling?


THE EURO, once the butt of currency dealers’ jokes, is now enjoying its place in the sun. Last week the currency traded above $1.50 against the beleaguered dollar for the first time in its nine-year history.

The dollar’s fall also helped to produce a grim new milestone for energy users. Its weakness contributed to a rise in oil prices to almost $103 a barrel. Though calculations vary, on most measures that is the highest oil price in inflation-adjusted terms in the modern era, exceeding the level reached in 1980 in the aftermath of the fall of the shah of Iran in 1979.

As with other dollar-priced commodities, the American currency’s fall has a twin impact on oil. It leads to a compensatory rise in prices and encourages investors to seek what they see as the safer haven of commodities. Both effects conspire to push prices higher.