US Dollar Loses Ground as Carry Trades Dominate

With traders looking for safe haven in an unsettled global market, the US dollar is heading lower. Greenback is struggling as Forex traders turn to the yen and to the euro.

Worries about China remain strong today, and global stocks are falling as a result. US stocks have opened lower, with the Dow dropping more than 100 points almost immediately. Around the world, especially in Asia, stocks have been falling. Slowdown worries in China are weighing on world markets, and currency traders are looking for safe haven.

However, they aren’t turning to the US dollar for safety right now. As usual, Forex traders are looking to the yen. But the euro is also heading higher as traders use the low-yielding euro to fund carry trades. It’s an interesting situation, since many wouldn’t consider the euro a safe haven, but the 19-nation currency is being traded as one right now.

Dollar strength could return later this week if economic news shows improvement. However, with the current troubles in the world, many now doubt that the Federal Reserve will raise rates in September, although some think it will still happen before 2016.

At 13:53 GMT EUR/USD is up to 1.1230 from the open at 1.1173. GBP/USD is up to 1.5397 from the open at 1.5413. USD/JPY is down to 121.1490 from the open at 121.6860.

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