Dollar Falls on Dubai Bailout

The dollar slipped slightly against most of its major counterparts on Monday after Dubai's announcement it had received help from Abu Dhabi to repay its debts. This bolstered risk appetite and eroded some of the U.S. currency's safe-haven appeal. By yesterday's close, the USD fell against the EUR, pushing the oft- traded currency pair to 1.4647. The dollar experience similar behavior against the GBP and closed at 1.6302.

The currency market's bent to sell dollars on improved risk appetite, contrasted with last week when strong U.S. economic data boosted risk sentiment to the benefit of stocks and the dollar, and have bolstered the view that the Fed may have to act sooner than expected to tighten monetary policy. Investors were also watching to see whether a year-long trend in which the dollar weakens on strong U.S. data was starting to break down.

Moreover, markets await more details from the Federal Reserve, which wraps up its last policy meeting of the year on Wednesday. Investors expect the central bank to keep its benchmark interest rate at a historic low level of near zero for the time being, but there is some concern that rates could rise sooner than previously thought as the economy improves. Higher interest rates or the expectation of higher interest rates in the near future can boost a currency as investors transfer their funds to higher yielding currencies.

Oil Falls again Despite a Weak Dollar

Crude Oil continued its decline for the fourth consecutive trading session following Bernanke's speech and estimations for lower inflation and a weak U.S. economy. The price of Crude ended the day down at $74.14 after an opening price of $75.60. This was a price drop of almost 2%. Today's weaker dollar may have helped to lessen the price drop in Crude.

The price may have also been influenced by weak fundamentals in the Crude Oil market. There may still be an excess amount of supply in the market that has yet to be reduced with lower demand due to the slowing global economy.

The positive from yesterday may be in Bernanke's speech. As long as inflationary pressures are muted, the Fed will continue to hold Interest Rates low. This could be a positive factor for the price of Crude Oil. A higher Interest Rate would be dollar positive, thereby potentially pushing crude oil prices lower.

Dollar Falls after Bernanke's Speech

Depreciation of the dollar after Bernanke's speech

Bernanke did not suggest in his speech to the timing of any expected interest rate hike, although there is a need to determine the timing of the tight monetary policy after the introduction of central bank liquidity into the economy during the financial crisis last year. The U.S. economy is still at the stage of recovery, with a high unemployment rate to 10%. At present, there is a lot of concern about inflation and thus diminishing opportunities to raise interest rates in the near future.

Federal President's remarks helped to support the euro / dollar, which led to the suspension of the dollar, which began on Friday after better-than-expected reading, which stated the report of the Employment Non-Farm. This has required significant decline in other currencies against the dollar, which traders have their purchases of these currencies, which increased the momentum of the bearish price movement of currencies. But today, we have witnessed a long-term upward trend as the euro rose strongly against the dollar.

The pair is trading now at 1.4840 after it was directly below the level of 1.4800 before Bernanke's speech. At the beginning of the day, the EUR / USD traded at its lowest level in five weeks. The pound fell against the dollar circulates at the level of 1.6452, down from the opening price at the level of 1.6476.

Canadian dollar will be the focus of traders during the trading day, which will be announced on the Bank of Canada interest rate decision which is expected not to change this time, will be announced on the accompanying statement of the interest rate decision. This may include the explanatory statement of any hints of the future direction of monetary policy in Canada. May go negative tone in the statement accompanying the rate decision of Canada to pay U.S. dollar / Canadian dollar to fall more towards the 1.0400 level today.