The US Dollar Continues to Slide

The US dollar continues to slide in the currency markets. The dollar dropped against the euro, yen, yuan, and the dollar index. Continued problems in the mortgage and credit markets is the primary cause for the decline of the dollar. Text in bold is my emphasis. From Market Watch:

The dollar weakened Monday, as fears about the continuing impact of the credit crisis offset positive economic signals and stocks plummeted.

"Even though the early indications from the weekend U.S. retail sales were not as poor as feared, and [third-quarter gross domestic product] is expected to be revised significantly higher later this week, the anticipation of more write-downs and losses related to the leveraged lending-subprime and otherwise-the credit-crunch to undermine growth in [the fourth quarter] and early 2008 weighs on the dollar," wrote currency analysts at Brown Brothers Harriman.

The dollar index, which measures the greenback against a basket of six major currencies, slipped to 74.815, down from 75.050 Friday.

The euro rose to $1.4870, compared with $1.4834 in U.S. afternoon trading Friday. Toward the end of Friday's holiday-thinned trading session, the European unit rose as high as $1.4966, its highest level since it began trading in January 1999.

The dollar dropped to 107.41 yen, down from 108.20 yen Friday.

On Monday, the People's Bank of China set its official parity rate for yuan trading at a record high the third consecutive trading day. The yuan finished at a fresh high of 7.3969 to the dollar on the over-the-counter market, up from a record of 7.4060 on Friday, according to XFN-Asia.

"We need to arrive at currency rates that are harmonious and fair and that will benefit the global economy," Sarkozy said in a joint statement with Chinese President Hu Jintao. "This means that, for its own sake as well, China needs to accelerate the appreciation of the yuan against the euro."

The U.S. Federal Reserve moved Monday to ensure year-end liquidity. It said it will conduct a series of term repurchase agreements through the New York Fed's Open Market Trading Desk that will extend into the new year "in response to heightened pressure in money markets for funding," the bank said in a statement on Monday.