Out of control dollar touches an 11 month high
On Wednesday, dollar ran out of control as it touched 11 month high against other major currencies. The extensive behavior showed by the dollar is a result of investors showing a faith in the currency, in the midst of failing global financial backdrop.
Greenback got extra support from down oil prices at the cost of high yielding currencies, as crude stumbled down $110 a barrel. The Gustav hurricane caused no harm to energy facilities in Gulf of Mexico.
With dollar soaring so high sterling faced more heat in spite of already being at 12 year low situation, on trade weighted basis. The rampant currency of US also affected euro as it battered to its weakest and lowest in eight months, prior to upcoming policy verdict from Bank of England and European Central Bank. Currencies like New Zealand and Australian dollar also weakened over 1 percent to a year low against the US dollar.
According to analysts, investors are finding dollar as their safest option for cash allocation, as compared to currencies of countries lacking in financial readjustment in wake of worldwide credit crisis. Adam Cole, RBC head of FX strategy, said that he is expecting persistence in the trend of dollar, with currency hurting the global sentiments and heeling US economy.
Dollar index rose to 0.7 months, which is an 11 month high of 78.614 tracking its show against other major currencies. The 9 percent gain by dollar index in mid of July proved many analysts wrong who were sure of long term recovery of the currency. The gain also broke enduring technical resistance levels.
With an eight months low of $1.4395, euro tripped 0.8 percent low against the US currency. Where as sterling continued to fall with technical recession as it faced $1.7669, a two and half year low.
Previously released data showed a five year low in service sector of euro zone in month of august, as it shriveled at lower than the anticipated rate.