The Euro rose to $1.3689 today, marking a 5-month high against the US Dollar, after upbeat Chinese PMI data earlier helped boost demand for riskier assets.
The Euro has risen by almost 12% against dollar this quarter, staying on track for its best quarterly gains in eight years. The Dollar index, meanwhile, fell to an 8-month low, setting it up leaving it on track for its biggest quarterly fall since the second quarter of 2002.
The Asian banks, helped by technical triggers, were said to be buying local currency against the Dollar during the Asian hours, and subsequently trading them for the Euro at the end of the day in a bid to rebalance their portfolios. The euro is poised to close above its 55- and 100-week moving averages at $1.3612 and $1.3572 respectively and technical analysts said this would open the way to more gains.
Faros Trading LLC, which carries out currency transactions for hedge funds and institutional
clients, said it expected the Dollar to fall 10% against the Euro by December 2010. This would represent its largest quarterly loss since 2002.
“The real weakening of the dollar is coming from Asian central banks who are essentially selling the dollar every single day as they get out of the dollars that they’re buying through intervention in Asia.” said Douglas Borthwick, who heads the Connecticut trading division of Faros.
The fall was expected to occur as the Asian and South American banks were selling the Dollar in favor of buying other currencies, predominantly the Euro.
