On the first day of the new week it was the dollar that was in retreat as investors shed some of their pessimism and risk appetite returned. Bolstered by Google’s announcement that it was buying Motorola, and Warren Buffet’s admission that Berkshire Hathaway had jumped back into equities in a big way last week, the S&P closed up more than 2% at just above 1,200. The single currency was a major beneficiary of the dollar’s decline – at one stage, the euro was up more than two big figures and looked poised to penetrate 1.45 as shorts were forced to cover, but it has since drifted back and in early London trading is just below 1.44.
Rumours that the issue of Eurobonds might just feature in today’s discussions between French PM Sarkozy and German Chancellor Merkel also triggered some euro short-covering yesterday. Against high-beta currencies such as the Aussie and the Norwegian krone, the dollar also fell back sharply, with losses of around 1.5% at one stage. Indeed, the Aussie threatened 1.05 in the London afternoon – just a week ago, it had fallen back briefly below parity. Another major currency to benefit from the dollar’s latest wobble was the Swiss franc – early in the day it was close to 0.80, but as the dollar lost ground the Swissie came back strongly and in early London is back under 0.78 again.
