“A lot of it is sentiment-driven and there the dollar is getting a vote of no confidence,” Mr. Dolan said. “The massive borrowing by the U.S. government is undermining confidence in the longer-term outlook for the dollar.”
Investors appeared to be directing their focus to riskier equities and turning away from the currency markets. The dollar is considered a low-yield investment, given the historically low interest rates in the United States. Last week, the Federal Reserve gave no indication that it planned to raise interest rates anytime soon, leaving investors to reroute their funds toward the stock market, oil and gold.
These two paragraphs don't make much sense to me. A vote of no confidence in the government would result in long-term interest rates on US bonds to shoot up to compensate investors for inflation. That isn't happening. In fact, as the next paragraph states, interest rates are historically low.
I'm no expert on currency markets, but it doesn't make sense to me that a wise bet against the dollar in currency markets (driving the dollar lower) wouldn't also be a wise bet in bond markets (selling Treasury bonds and driving long-term interest rates up). It sounds to me like people don't have much faith in American economic growth over the next 10 years, which explains both trends, and could actually be remedied by additional deficits (stimulus spending). See Brad DeLong for more: http://delong.typepad.com/sdj/2009/11/a-joyless-recovery.html.>
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