Quarterly Markets Review: Dollar's Pain Is Big Gain for Rivals --- Battered Greenback Continues Its Slide, as Some See a Bottoming at Year-End
The dollar's slump worsened in the third quarter as economies chugged back to life and investors moved their cash into riskier investments in search of higher returns.</br></br>The greenback may tumble further in coming weeks as investors bet that other countries will raise interest rates before the Federal Reserve, boosting returns on those currencies. But the dollar's weakness could come to a halt if it drops too low: Eventually, policy makers in Asia and Europe may start complaining that a weak dollar hurts their ability to export goods to the U.S., which could help the buck, while bearish investors may move to lock in profits by unwinding negative bets.</br></br>"There's potential for a little more pain, but the dollar's weakness has pretty much run its course," says Alan Wilde, head of fixed income and currency at Baring Asset Management in London.</br></br>In the quarter, the dollar lost 4.1% of its value against the euro and dropped 6.8% against the Japanese yen, dipping to 89.77 yen on Monday, its lowest level since late January. The dollar's losing streak, which began when stocks started rallying in March, has picked up steam in recent months. Currencies of big commodity-producing nations soared against the dollar, with Australia's currency rising 9.5% partly on optimism about China, a big buyer of its natural resources.</br></br>While the dollar was weak, the British pound was even weaker. It lost 2.9% against the dollar and 6.9% against the euro. That decline came after the pound gained 15% against the greenback in the second quarter.