October 22, 2007

The US dollar set fresh record-lows against the euro

The US dollar set fresh record-lows against the euro before a substantial reversal in later currency trading, posting its largest single-day rally since May 31, 2005. Forex speculators initially sold the greenback on news that the weekend’s key G7 summit failed to specifically mention dollar weakness in its official statement. Yet traders scrambled to cover US dollar short positioning through a later rout in European equity markets. A virtually empty economic calendar left currency markets to react to shifts in overall risk sentiment, and a sharp downturn in European equity markets encouraged over-leveraged speculators to scale back extended forex positioning.

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