The U.S. Dollar Is Sharply Lower

Posted Sep 1st 2010 10:00AM by Connie Madon
Filed under: Market Matters, Commodities, Currency

The U.S. dollar, which has recently been rather steady, is sharply lower today. September futures for the dollar are trading at 82.30, down 0.90.

Better data coming out of China and Australia pushed the dollar lower, according to traders. While that may be true, it really doesn't explain why the drop was so sharp.

Let's look behind the scenes a bit. Do you remember the rally off the 2009 lows? It was fueled mainly by a weaker dollar, which, in turn, drove up the prices of commodities and the stock market.

Whether this sleight of hand is now underway remains to be seen. Commodity prices are indeed higher today, especially in the grains, gold and oil.

The Federal Reserve is in a bind. They decided not to start a new bout of easing, but they know they must do something. A weaker dollar would fuel commodities and the stock market and keep deflation at bay.

Let's see what happens in the coming weeks and if the dollar keeps falling. Let's also remember that the last rally and decline of the dollar worked well. Very often, a second try is not all that successful.

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