Dollar Down Again As G20 Backs Ongoing Stimulus

PAN PYLAS

LONDON (AP) — The euro pushed back up above $1.50 Monday after finance ministers from the Group of 20 rich and developing countries steered clear from addressing the weakness of the U.S. currency against most of its competitors at a meeting over the weekend.

At the meeting in St. Andrews, Scotland, the finance ministers pledged to "continue to provide support for the economy until the recovery is assured" — in effect telling the markets that borrowing costs will not be rising any time soon.

As a result, investors continued Monday to borrow cheap dollars — with the Fed funds rate in a range of 0-0.25 percent, the cost of borrowing dollars is anything but prohibitive — to finance riskier investments, such as stocks and oil. According to economist Nouriel Roubini, developments in financial markets over recent months, particularly the sharp rise in stocks since March, have been characterized by this "mother of all carry trades."

In a note prepared for the meeting, the International Monetary Fund said the dollar was "now serving as the funding currency for carry trades," and that these trades may be "contributing to upward pressure on the euro."