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Friday, April 22, 2011

Dollar plunges to 2.5-year low

The dollar dropped to its lowest level in more than two-and-a-half years on Thursday as buoyant risk appetite prompted investors to sell the currency to fund carry trades.

Analysts said robust corporate earnings figures had boosted hopes over global growth, while the prospect that US interest rates would remain at ultra-low levels was fuelling demand for carry trades, in which low-yielding currencies such as the dollar are sold to finance the purchase of riskier, higher-yielding assets elsewhere.

Market rumour that the People’s Bank of China was poised to implement of substantial, one-off revaluation of the renminbi also weighed on the US currency.

The dollar index, which tracks its progress against a basket of six leading currencies, fell 0.8 per cent to 73.785, its weakest level since August 2008. Traders said the stage could now be set for the index to target the record low of 70.698 it hit in March 2008.

The dollar also dropped 0.9 per cent to a 16-month low of $1.4641 against the euro, fell 1 per cent to a 16-month trough of $1.6560 against the pound, lost 0.8 per cent to a record low of SFr0.8817 against the Swiss franc and plunged 0.7 per cent lower to Y81.93 against the yen. (read more)