Archived IMT (2009.07.28)

Dollar index breaks below the June lows at 78.31, now at its lowest since December. 78.25 is the 61.8% retracement of the rise from the 71.29 low to the 89.50 high. The fact that dollar selling is occurring despite a flat close in the Nikkei, underlines the weakness of the US currency, which was magnified by hawkish comments from the RBA. RBA Governor Stevens said earlier today there was no rule dictating the RBA that it has to wait for unemployment rates to peak before cutting interest rates. Markets were already expecting the RBA to raise rates by 25 bps by year-end. Thus, todays comments further boost the long term viability of the currency. 0.8350 remains a key intermediate target before a retreat is likely ahead of US consumer confidence and the $42 billion 2-year auction.