Greenback weakens on decline in demand

The US dollar weakened in relation to the euro, the pound and several other currencies Tuesday as global demand for the currency declined as equities markets rallied.

News of the UK bank bailout helped the pound, while the Office for National Statistics announced that inflation has now exceeded the Bank of England’s 2 percent target for a full year as prices rose 5.2 percent on an annualized basis in September.

It cost $1.7478 to buy a pound, while at the same time, a euro was worth $1.3667.

The dollar was also weaker versus the Brazilian real, which traded at R$2.126 to the greenback, as it was helped out by the US plan to put $250 billion into the US banking system and by a sale by the Brazilian central bank of US dollars on the spot market.

The South African rand also gained on the US currency, trading at R9.0125 to the dollar after equities markets rallied, encouraging investors to buy high-yield currencies such as the rand.

Meanwhile, the yen weakened as investors returned to carry trades as global governments continued to detail plans to support banks, with the Japanese currency trading at ¥139.675 to the euro and at ¥102.195 to the US dollar while it traded at ¥72.0219 to the Australian dollar and at ¥63.823 to the New Zealand dollar.

While they strengthened versus the yen, the Aussie and kiwi each also gained on the US dollar, with the Australian currency helped by the announcement from Prime Minister Kevin Rudd of a stimulus plan to help out families, the elderly and first time home buyers.

The Australian dollar traded at 70.47 cents US in early afternoon trade in New York while at the same time the kiwi traded at 62.45 cents US.

Story link: Greenback weakens on decline in demand