Fed Rate Cuts Dull Perceived Safety of Dollar: Chart of Day

趋势由此而变
http://www.bloomberg.com/apps/news?pid=20601068&sid=aR9Yf.fZy0EM&refer=economy
Dec. 18 (Bloomberg) -- The U.S. dollar is poised to fall against other major currencies as the Federal Reserve’s “aggressive” rate cuts make the greenback less attractive to investors, Credit Suisse Group AG said.
The Fed’s “easing and very low U.S. rates will ultimately undermine the dollar across the board,” analysts Ray Farris and Daniel Katzive wrote in the report. “Perceptions of relative systemic risk” are declining, they said.
“One important implication of this is that the dollar-yen and dollar-euro, which had been inversely correlated throughout the period of deleveraging, have now become positively correlated again,” Farris and Katzive wrote yesterday.
The CHART OF THE DAY shows how the euro and yen have begun to track each other more closely since the beginning of December. The two had been mostly moving in opposite directions between August and November as a global financial crisis prompted investors to sell higher-yielding currencies. The European Central Bank’s benchmark interest rate of 2.5 percent compares with as low as zero in the U.S. and 0.3 percent in Japan.
During the same period, the yen rallied against all of the world’s 16 most-active currencies as credit-market losses and a global stocks rout sparked a reversal in so-called carry trades, where investors get funds in a country with low borrowing costs and buy overseas assets.
“The yen continues to gain support from a repatriation of foreign assets by Japanese investors,” National Australia Bank Ltd. said in a report. “The ongoing narrowing of interest-rate differentials, with spreads between Japan and all major currencies collapsing towards zero, is yen positive.”
There is a 58 percent chance the BOJ will lower borrowing costs when a two-day policy meeting concludes tomorrow, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps. The odds were 53 percent yesterday.