Thy Name Is Ambivalence

This gives rise to two thoughts. First, I've finally re-discovered a reason to be out of Europe right now. And yet, second, I've also re-discovered a reason to go back there and get a job!

The dollar could slide still further, in spite of hitting an all-time low against the euro last week in the wake of George W. Bush's re-election, currency traders have said.

The dollar sell-off has resumed amid fears among traders that Mr Bush's victory will bring four more years of widening US budget and current account deficits, heightened geopolitical risks and a policy of "benign neglect" of the dollar.

[...]

Speculative traders in Chicago last week racked up the highest number of long-euro, short-dollar contracts on record. Options traders have reported brisk business in euro calls - contracts to buy the euro at a pre-determined rate.

However, the market has been rife with rumours that the latest wave of selling has been led by foreign governments seeking to cut their exposure to US assets.

India and Russia have reportedly been selling US assets, as well as petrodollar-rich Middle Eastern investors.

China, which has $515bn of reserves, was also said to be selling dollars and buying Asian currencies in readiness to switch the renminbi's dollar peg to a basket arrangement, something Chinese officials have increasingly hinted at. Any re-allocation could push the dollar sharply lower and Treasury yields markedly higher.