US Dollar Falls Back as Safe Haven Demand Drops

US dollar is heading a little lower today against European currencies as safe haven demand drops. Risk appetite has made its appearance in the markets, and the euro and the pound are benefitting.

For now, the dollar index is heading a little bit lower as Forex traders look for better yields, rather than safe haven. With the latest news indicating that an agreement on the fiscal cliff is close to being reached, the US dollar is falling back. Republicans and Democrats are starting to make concessions, moving beyond the posturing seen over the course of the last few weeks.
Additionally, Forex traders are reminded that, come the new year, there will be increased easing on the part of the Federal Reserve. Attempts to further stimulate the US economy will likely weaken the US dollar, and if things continue to show some improvement in the eurozone, the greenback will likely see some weakness for a while.
There are still plenty of hurdles to overcome as the world attempts its move toward economic recovery, so the greenback isn’t much weaker, and if things go south in Europe, the US dollar could see a resurgence.
At 16:15 GMT the dollar index is down to 79.333 from the open at 79.571. EUR/USD is up to 1.3215 from the open at 1.3164. GBP/USD is up to 1.6246 from the open at 1.6206.

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