The dollar continued its decline against the euro and the pound today as the currency traders believe that the bank help plans by the U.S. administration will boost the demand for the high-yielding assets, including the currencies with higher interest rates.
The U. S. currency wasnt alone in its depreciation today, the yen declined as well, as its safety became less attractive advantage compared to the relatively high interest associated with some other currencies. The dollar rose slightly against the yen. The markets expect that the Japanese monetary authorities will pour more liquidity into their financial system. Today traders also expect the announcement from U.S. Treasury Secretary Timothy Geithner on providing as much as $1 trillion to buy «toxic assets» out of the U.S. banks.
Analysts believe that the relief brought by the «bad bank» plan will allow the emerging markets to start a long rally with a possible carry trade revival on both dollar and yen based currency pairs. For the Forex market participants this means that the U.S. dollar and the Japanese yen will be more safely located on the short side of their positions.
EUR/USD rose from 1.3656 to 1.3712 as of 7:58 GMT today after opening with a weekly gap from 1.3580. GBP/USD went up from 1.4491 to 1.4607, while USD/JPY advanced slightly from 95.67 to 95.96 today.
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