Demand for Higher Yielding Assets Drives Down U.S. Dollar

Demand for higher yielding assets is driving down the Dollar. Traders are chasing yield today in the higher risk currencies following the interest rate hike in Australia

Demand for higher yielding assets is driving down the Dollar. Traders are chasing yield today in the higher risk currencies following the interest rate hike in Australia

Traders are also pressuring the Dollar because of a story circulating that the U.S. currency will be replaced as the crude oil pricing currency.

The EUR USD is trading strong at the midsession on demand for higher risk, higher yielding assets. There is also some talk that traders believe the Euro Zone economy will pull out of the recession before the U.S. economy.

The GBP USD is trading weaker because of fundamental factors. The economy continues to remain weak and traders expect the Bank of England to continue with its stimulus program. Trading has been light ahead of Thursday’s BoE meeting. Losses have been limited because of the weaker Dollar.

Strong demand for higher yielding currencies is also supporting the Japanese Yen. The rally has been limited as traders are aware of a possible intervention by the Bank of Japan if prices get to volatile or rise too fast.

The AUD USD hit a new high for the year following a boost in interest rates overnight. The Reserve Bank of Australia was the first G-20 country in over a year to increase interest rates. This move reflects the strong economy in the Asian-Pacific region. The NZD USD is showing gains because of the rate hike in Australia and on the perception that the New Zealand economy is also growing at a steady pace