Did you expect to continue to see dollar rising against other currencies? That won't happen until the government decides to help banks once again, a recent study revealed...
The U.S. dollar fell against the euro and the pound Friday as the government stepped up its efforts to aid troubled banks and boost the ailing economy.
The euro rose 1.4% to $1.3294 from $1.3154 late Thursday in New York, while Britain's pound bought $1.4742, up from $1.4663.
Against the yen, the dollar declined 1% to ¥90.57. But the Japanese currency fell more than 2.2% against the euro to trade at ¥120.47.
"Government backstops, stimulus packages and presidential inauguration optimism is helping offset the gloom emerging from the raw data," said Ashraf Laidi,chief market strategist at CMC Markets, in a research note.
Many investors view the dollar as a safe alternative to more economically sensitive assets such as stocks or high yielding currencies. As a result, the greenback often falls when investors are more optimistic about the economy and therefore more willing to take risks.
The traditionally high-yielding euro and pound had been under pressure in previous sessions as turmoil in the banking sector undermined investors' appetite for risk. But the sentiment changed Friday as the government expanded its efforts to aid struggling banks.
"Risk appetite remains propped by another U.S. government back stop to a U.S. bank, this time to Bank of America's efforts in absorbing Merrill Lynch," Laidi said.
