Dollar at Five Month Low

The US dollar is at its lowest this year against major currencies including the euro. Rising stocks and data indication that a recovery is underway have caused a sell off of dollar denominated assets as investors seek higher yielding currencies. The dollar did recoup some losses after data revealed that US inflation rose more than had been predicted and manufacturing showed a slower rate of contraction. Shaun Osborne of TD Securities stated, “Generally, this is still a case of better-than-expected data not necessarily good for the U.S. dollar. We expect no rebound in sight for the dollar just yet.”

Commodity Based Currencies Big Winners

The euro to dollar exchange rate gained 0.2% and traded at $1.4178 it’s highest since December. The Pound to dollar rate rose to its highest in seven months and traded at $1.6436. Commodity based currencies such as the Aussie and Kiwi dollars were the big winners as investors sold dollars and bought commodities. Brian Dolan of Forex.com said, “This is a market that is in the process of selling the dollar against everything, buying commodities, and that should continue today.”

Dollar Gains on Yen

The dollar to yen rate gained 1.1% and the yen traded at 96.31. The yen is widely believed to be the safest forex currency and traditionally falls as risk appetite increases. Currency exchange rates were also affected by the news that General Motors had filed for bankruptcy. Washington has pledged an additional $30 billion to rescue GM fueling investor concerns about massive US deficits and how they will be financed.

Euro Zone Data Better Than Expected

Positive data from the Euro Zone also affected currency exchange rates. The Euro Zone PMI manufacturing index rose to its highest in seven months. The UK Manufacturing PMI was also higher than expected. Recent data showing that the recession is easing has weighed heavily on the dollar and most experts expect this trend to continue in the near future.