After roughly three years of relentless, mostly one-way bearish action in the U.S. dollar from the 2002 low in euro/dollar (EUR/USD) around 85 cents to the 2004 peak around $1.36, the bears shaved off around 37 percent of the value of the dollar vs. the euro . Since that 2004 peak, a large trading range has developed between roughly $1.16 and $1.33.
A dollar sell-off in November 2006 was ostensibly inspired, in part, by talk of central bank reserve diversification. That month, the euro/dollar moved from $1.26 to $1.32. Currency watchers say the central bank reserve diversification issue has sparked nervousness in the forex arena and is moving markets. Compounding the issue is the lack of transparency regarding official reserve holdings and allocation breakdowns; central banks don’t necessarily broadcast or even publish these numbers.
Market watchers say this factor has already impacted U.S. dollar levels.
“It is one of the main reasons the euro is at $1.31 right now instead of $1.21,” says Andy Busch, global FX strategist at BMO Capital Markets.
Subscribe to:
Post Comments (Atom)
Post a Comment