20 Sep 09 Forex Market Sees Dollar Hit 2009 Low As Investors Embrace Risk Taking

The US dollar has hit a one year low against multiple currencies and continues to remain vulnerable while investors embrace higher risk assets. Investors are taking cues from the recovering economy such as higher than expected US retail sales and growth in the manufacturing sector of the market.

Federal Reserve chairman Ben Bernanke has warned that the recovery could be slow but that the recession is nearly over. Market players have shown a willingness to do dollar carry trades because global central banks are not seen as likely to halt their emergency steps in the near future.

In September alone, the dollar index has dropped 2 percent to stand at 76.482, but is likely to continue down towards the 2008 low of 70.70 before the end of the year. On the other hand, the euro is trading at $1.4675 to the dollar. The yen is holding steady at 91.07 which is above a seven month trough of 90.18 that it has reached in the past week.

Until a short time ago, the low-yielding yen stood as the choice currency for investors who focus their efforts on borrowing low cost to turn around and invest in higher-yielding currencies or assets with a greater risk level. As dollar-selling continues to gain momentum, Tokyo traders are on edge about a potentially sharp decline in the dollar versus the yen during the upcoming 3 day holiday period in Japan. As a result, some option dealers plan to stay close to Tokyo over the long weekend.