US Dollar Bounces Off Record Low

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The dollar has been battered for quite some time. The dollar has had a slight rebound, but the same issues that have been plaguing it haven’t left yet. The credit crisis is the main concern keeping the dollar near its’ all time low.

“The mood is still nervous and the dollar is effectively tracking developments in credit markets,” said Neil Mackinnon, chief economist at ECU Group.

The dollar was close to a 26-year low against the British pound and a record trough against the Canadian dollar amid concern that major US banks may be sitting on bigger losses than previously believed from the subprime loan crisis.

The head of the world’s biggest bank, Citigroup, stepped down over the weekend as the group said it expected losses of up to 11 billion dollars (7.6 billion euros) related to problems in the subprime mortgage sector.

Credit worries overshadowed Friday’s better-than-expected employment data as markets speculated about the chances of further interest rate cuts by the US Federal Reserve.

“A strong payrolls report for October didn’t help the dollar as heightened fears of further major credit-related losses by US banks saw traders price in more Fed easing,” wrote NAB Capital strategist John Kyriakopoulos in a note.

It looks like the dollar will remain weak as long as the credit markets remain in a funk.

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