No. of Recommendations: 5
But this time the dollar is falling. USD index is about the lowest since January.
Only about 3% above the five year lows.
...
Perhaps because everyone is expecting an interest rate cut. A cut weakens the dollar. It may be bigger and sooner than people were expecting recently.
Another popular theory: the carry trade had become popular again. People had borrowed vast piles of Japanese yen at low rates and plowed it into T-bills at much higher rates, collecting the interest rate differential. With leverage this is very profitable, while it lasts. As soon as there were hiccups in the market (especially the relative chaos in Tokyo markets), they decided that the risk of turmoil was rising and so decided to stop doing this, meaning selling their US bills and paying back yen loans. That requires selling dollars to buy yen. This drove the yen up and drove the dollar down.
Of course, trying to ascribe a reason for any market move is usually a bad idea, bordering on hubris. Things just happen sometimes!
Jim
