Dollar weakens in year-end trade

By Hibah Yousuf, staff reporter


NEW YORK (CNNMoney.com) -- The dollar softened against rival currencies Thursday at the end of a mostly quiet, holiday-shortened week.

"It's a very illiquid market today, and it's getting worse by the hour," said Neil Mellor, currency strategist at the Bank of New York Mellon in London. "The year is winding down with sharp movements in price, but there are no new stories behind those movements."

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With fewer investors trading in the market, price movements are exaggerated.

The dollar edged lower against the euro to $1.4390 and versus the pound to $1.6192. It was slightly higher against the yen, at ¥92.7070.

The buck has climbed against other major currencies during the final month of the year, as investors have been winding down trades and reaping profits on high-yielding currencies that have performed well during the year.

The dollar index, which tracks the greenback against the euro, yen and four other currencies, is up 3.6% in December, but down 4% for the year.

"The principal factor for the dollar's weakness has been the Federal Reserve's commitment to keep interest rates on the floor," Mellor said.

The Federal Reserve has kept its key interest rate between 0% and 0.25% since last December in an effort to stimulate the economy, which has pressured the dollar this year.

Mellor expects the weakness trend to persist in 2010, as the Federal Reserve continues to insist it will hold interest rates near the historic lows for the foreseeable future. To top of page

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