The US dollar showed continued weakness as it fell to a five month low point against the euro.  The US dollar weakened to $1.3830 against the euro late yesterday afternoon.  It rebounded by .1 percent by midnight.  The weakness in the greenback has been expected and it is a question of how low it will go.

The US dollar is falling as predicted due to the increasing bravery of the investors seeking higher yields.  The greenback is the low-risk currency choice and there are signs the market is assuming more risk-taking.  That will almost always lead to dollar weakening.

The dollar fell against the dollar index to 80.897 which is a value not seen since last January.  The dollar fell against the UK pound and the yen also.  The dollar weakened to 94.50 yen per dollar and to $1.5817 against the UK pound.

One of the reasons the dollar weakened is due to the Federal Reserve indicating the recession will be deeper than expected.  The Federal Reserve made it clear in its April meeting minutes just released that members had discussed the possible need for the government to buy additional mortgage assets and government securities.  The signs the government is willing to cover more of the remaining market risk due to the recession was interpreted by currency traders to be a sign that it’s safe to move some investments into riskier currencies and markets.  The Federal Reserve made a final decision to hold off for now on the additional injection of dollars into the economy.

The Canadian dollar was on the move yesterday, 20-May-2009, for the third consecutive day.  It reached a 7 month high against the US dollar at 87.62 US cents.  At one point it had climbed to a 1.7 percent increase in a single day.

The loonie is responding to rising oil prices and the increase in the US equity markets.  Oil has risen to $62.26 for July deliveries. Many analyst predictions project the Canadian dollar to weaken by year end against the US dollar to as low as C$1.19 versus the C$1.14 reached yesterday.

Mexico’s peso was once again in the news as the government reported GDP news.  The economy is expected to contract 5.5 percent for 2009 which is higher than projected last January.  The peso is also responding to the Federal Reserve minutes indicating the US GDP will contract by 2 percent in 2009 instead of by 1.3 percent.  Mexico is heavily dependent on exports to the US of course, so the continuing recession does not bode well for the Mexican economy.

The Mexican peso weakened to 13.0215 pesos per US dollar.

The Israeli shekel was on the move too.  The currency strengthened to 4.0080 against the US dollar.  This represented a 2.5 percent increase. 

The Australian dollar strengthened to 78.09 US cents as oil prices rise and the global recession eases.  Also strengthening was the New Zealand dollar which advanced to 60.82 US cents. 

As investor fears ease about the recession, more normal trading is expected to resume in the forex market.  The lack of consumer confidence has created an uncertain investment environment over the past months making it difficult to make predictions.  But there had been one solid prediction and that was the fall of the dollar.