Mortgage fears undermine dollar

Mortgage fears undermine dollar - 11-07-07

The dollar will remain vulnerable in the short term, but a reduction in aggressive investment strategies will tend to limit selling pressure on the US currency.

The dollar fell sharply in US trade on Tuesday with the US currency weakening to fresh all-time lows around 1.3740 against the Euro while the trade-weighted index weakened to a 30-month low. The US currency was unable to secure any recovery in early Europe on Wednesday.

The dollar was unsettled by renewed fears over the US housing sector. US company Home Depot issued a fresh profit warning which increased fears over a prolonged downturn in housing-related sales. Standard & Poor's also downgraded a series of sub-prime mortgage bonds which revived fears over stresses in the investment-banking sector. The combination increased fears over US growth trends and confidence will deteriorate further if there is a weak retail sales report on Friday.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

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