Dollar Falls vs. Euro For Three Straight Trading Sessions

On Wednesday the US dollar fell against a basket of major currencies. The dollar has fallen against the euro in three straight trading sessions and the dollar fell against the Japanese for three out of the last four trading sessions. The dollar vs. yen exchange rate is now at a two month low.

FOMC Releases Minutes of Meeting

The Federal Open Market Committee (FOMC) released the minutes of its meeting that indicated that the Fed plans to increase purchases of mortgage and government securities. The Fed’s actions have affected global currency exchange rates and have put pressure on the dollar. Gains in the euro to dollar exchange rates were halted by a decline in Asian stocks which prompted risk aversion.

Geithner’s Remarks

The dollar has been falling since the beginning of the week and has displayed a downward trend since April. Recent rallies in equity markets have increased risk appetite putting pressure on the dollar. Currency exchange rates were also affected by remarks by US Treasury Secretary Timothy Geithner saying the economy was “starting to heal” due to government bailouts. A successful share offering by the Bank of America lifted risk sentiment and put further pressure on the dollar.

DXY Falls

The dollar index (DXY) which measures the performance of the dollar against a basket of six major currencies fell to 80.909, the lowest since January. The dollar has been put under further pressure as investors sell dollar-denominated assets and seek higher yielding and riskier investments. Michael Woolfolk of Bank of New York Mellon, stated, “Overall, this is still a green-shoots rally. It’s evident in crude oil above $60, it’s evident in stocks, and it’s to some extent being driven by animal spirits.”

Fed Lowers Forecast

The Federal Reserve lowered its economic growth forecast and predicted higher unemployment. Despite the Fed’s bearish view of the economy currency traders ignored the Fed’s pessimistic view and sought further asset purchases which has affected global currency exchange rates.