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The dollar fell again this week after the Federal Reserve confirmed market suspicions that it would not be ready to tighten monetary policy for some time to come.
Extending its run of weekly losses to five – the dollar index, which tracks the US unit’s performance against a basket of other major currencies, fell 3.8 per cent in April, hitting a three year low of 72.83. The trade-weighted index has now fallen 7.6 per cent since the beginning of the year and has not enjoyed a positive month since November.
Following the Fed meeting on Wednesday, when chairman Ben Bernanke confirmed the federal funds rate would remain at exceptionally low levels for an extended period, first-quarter GDP on Thursday did little to counter expectations that the central bank would continue its easy monetary policy for the foreseeable future. Growth in the first three months of the year came in at an annual 1.8 per cent, down from 3.1 per cent in the final quarter of 2011.
This combination of low interest rates and steady, but unspectacular growth, proved to be a perfect mix to feed risk appetite.
The Swiss franc pushed to a record high against the dollar at SFr0.8666 this week. Traditionally sought out during periods of uncertainty, the Swissie began its kick higher at the height of the eurozone debt crisis in June last year. In recent weeks, however, strong economic data and robust corporate performances have driven the franc further still. It climbed nearly 2 per cent to SFr0.8683 versus the dollar this week.
One of the best performances over the five sessions was from the euro, as concerns over the debt crisis faded. “Provided the European debt crisis remains confined to Greece, Ireland and Portugal, and the spillover to Spain is minor, the divergent monetary policy stances between the Fed and European Central Bank will remain the main driver,” said Marc Chandler at Brown Brothers Harriman.
The euro climbed 0.9 per cent to £0.8908 versus the pound and gained 1.1 per cent to Y120.10 on the yen.
Sterling was buoyed against the dollar and the yen after the UK economy was shown on Wednesday to have returned to growth. Although at just 0.5 per cent, many called it a pitiable return to growth, investors were at least glad that the economy had not gone back into recession. The pound gained 0.2 per cent to Y135.93 against the yen.
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