As reported by Reuters’ Hideyuki Sano, the U.S. dollar rebounded from a three-year low against a basket of currencies on Monday as news that a U.S.-led operation had killed al Qaeda leader Osama bin Laden prompted short-covering in a heavily-sold greenback, though traders think any impact will be temporary.
The currency was due for a corrective rebound, dealers said, with traders having sold the dollar against pretty much everything from the euro and commodity currencies to oil and precious metals for the past few weeks.
Still, perceptions that the U.S. central bank’s stimulative policy stance will continue to cheapen its value is likely to keep hurting the dollar, they said.
In a knee-jerk reaction to the news that Al Qaeda leader Osama bin Laden was killed on Sunday in a firefight with U.S. forces in Pakistan and his body was recovered, the dollar was bought back broadly by traders and investors.
U.S. stock futures price rose while oil prices fell, though illiquid trading conditions due to holidays in many markets in Asia and the UK on Monday are exaggerating price moves.
“Although some could argue that this news has taken out one risk factor for the global economy, my overall impression is that Osama bin Laden already seemed like he was from a page in a history book,” said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust Bank.
“The dollar‘s probably been bought back as dollar-selling had gone a bit too far. But there’s no change in the fact that the Fed’s exit (from its easy policy) will still be some way off,” he added.
The dollar index .DXY rose about 0.2 percent to 73.152, after falling to 72.813, a fresh three-year low in earlier trade.
As the index has continued to slide for the past two weeks and logged a decline of almost 4 percent in April, a fall big enough to cause worries about speed correction. Some oscillators, such as the 14-day RSI, showed the dollar was oversold in the near term.