US Dollar Plummets on Central Bank Coordination

US dollar is down across the board on the latest move by the world’s major central banks to increase liquidity. In an effort to inject confidence in global markets, several central banks are coordinating efforts to make the US dollar cheaper.

Worried about another credit squeeze, several central banks, including the Federal Reserve, European Central Bank, Bank of England, Bank of Japan, Swiss National Bank and the Bank of Canada, are coordinating efforts to continue with dollar swaps. Special dollar swaps are being extended through 2013, in an effort to increase the liquidity of the world’s dollar supply.

Cheaper US dollars will be used in funding around the world, in the hopes that increased liquidity will help prevent credit market problems that could result in economic difficulties. The move is especially bringing hope to the embattled eurozone.

While global equity markets respond with enthusiasm (the Dow is up nearly 400 points in mid-morning trading), currencies other than the dollar are surging as well. Dollar weakness is the natural result of a concerted effort to make greenbacks cheaper, and the Forex market is behaving as expected. Commodities like gold and oil are also surging on dollar weakness.

At 15:07 GMT EUR/USD is up to 1.3463 from the open at 1.3317. GBP/USD is also higher, at 1.5731, up from the open at 1.5597. USD/JPY has dropped to 77.6320 from the open at 77.9330. USD/CAD is lower at 101.56 from the open at 103.21.

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