Dollar weakens as stocks surge
Greenback continues its decline, hits a 14-month low against euro, as investors push the Dow above 10,000.
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| Click the chart for current FX rates. |
NEW YORK (CNNMoney.com) -- The dollar remained under pressure on Wednesday as investors' appetite for riskier assets, such as stocks and commodities, increased following strong quarterly reports.
The dollar slid against the euro to $1.4924 after hitting a 14-month low earlier in the session. The greenback also fell against the yen and the pound to ¥89.4005 and $1.5974, respectively.
"Until risk appetite trends abate, the dollar will be fixed with how equities and commodities move," said John Kicklighter, currency strategist at DailyFX.com.
Stocks surged Wednesday, with the Dow industrials closing above the 10,000 level for the first time in a year, following forecast-beating quarterly profits from Intel (INTC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500).
Commodities also rushed to highs. Gold continued to tread in record territory, and oil prices topped $75 for the first time this year.
Analysts predicted better-than expected retail sales data would boost the greenback, but the figures did not overwhelm investors' risk appetite. Overall retail sales dropped in September due to the end of the government's Cash for Clunkers program, but sales outside of the auto industry gained.
"We were hoping that this morning's economic data would have an impact on price action, but the primary driver for the dollar is still risk appetite," Kicklighter said. "Whenever these fundamental drivers are at extremes, correlation really tightens up."
Kicklighter said investors will be focusing and feeding risk appetite through all markets with the Dow above the 10,000-level, and the correlation will not break down until there is steadier development.
The long term direction of the dollar is most sensitive to the Federal Reserve's monetary policy. The minutes from the two-day meeting, concluded Sept. 23, released Wednesday said that the Fed will keep interest rates near zero. Kicklighter says that there is only a 5% chance of a rate hike by December, but the forecast for an increase in early 2010 is more hawkish. 
