Reply #39: Dollar hits two-month lows as bonds rally [View All]

[UpInArms]

http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2006-11-10T183939Z_01_N10271178_RTRIDST_0_MARKETS-GLOBAL-WRAPUP-5.XML

NEW YORK, Nov 10 (Reuters) - The dollar hit its lowest level in more than two months on Friday after China's central bank chief talked of plans to diversify $1 trillion in currency reserves, while gold fell steeply on profit taking.

An underlying market focus which is also putting downward pressure on the dollar is investors' expectation the Federal Reserve will have to start cutting interest rates in coming months as the pace of economic growth slows.

That same expectation helped U.S. Treasury bond prices to rally on Friday, pushing yields down to their lowest in a week. Bond yields and prices move inversely.

<snip>

The dollar tumbled for a second straight session after Zhou Xiaochuan, the Chinese central bank governor, said that China planned to diversify its assets across different currencies and investment instruments, including in emerging markets.

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