Lot of factors were responsible for dollar’s downward slide on Monday. Like before Fed Chairman Ben Bernanke’s comment that interest rates will continue to be low as the economy shows some signs of recovery was the most important factor in pulling the dollar down.

Also lack of agreement between Asian and US leaders on currencies was taken as a signal by traders to sell the dollar. The United States and China leaders had met at the Asia Pacific Economic Cooperation (APEC) forum in Singapore to discuss currencies. However they failed to come to an agreement which was taken by traders as an indication that the dollar’s downward trend will continue and that the US interest rates will continue to be low while interest rates in other countries may eventually increase. In search of better return investors normally transfer funds to an economy with higher interest rates. Other economies though with still low interest rates have maintained higher rates than the US. The European central bank and the bank of England have respectively maintained their rates at 1 percent and 0.5 percent which is higher than the Fed’s current near zero rate.

The dollar was down to 74.990 against a basket of currencies which is approximately a fall of 0.5%. The euro helped by the surge in the European stock markets increased by 0.4% against dollar to $1.4975. The British pound increased to $1.6836 from $1.6672. Against the Japanese yen dollar fell to 88.98 Japanese yen from 89.63 yen. Amongst other currencies dollar declined to 1.0068 Swiss francs from 1.0135 and declined 1.0467 Canadian dollars from 1.0517.

The movements in dollar is currently being watched carefully by all economies. With dollar having the status of reserve currency, decline in the value of dollar has far reaching implication for the world economy. Policy makers in Europe worry that strengthening of Euro against the dollar is harming the economic recovery prospects in the region.

China on the other hand with its huge pile of US dollar in its reserves is worrying the most about the decline in dollar’s value. China which currently holds roughly 70 percent of its massive $1.9 trillion forex reserves in dollars is rightly concerned that the dollar’s drop has eroded the value of its holding. Also analyst feel that low US interest rates and weak dollar posses a new risk to the global financial system as it fuels speculation in overseas asset market.

The future direction of US dollar will largely be determined by the data releases in the coming week. Traders and Economists are particularly looking forward to the retail sales number as it is considered to be an important gauge of consumer sentiment. Dollar is expected to further lose value with a favourable retail sales report for October which many economists are expecting. Better than expected economic reports tend to pull down dollar as it increases risk appetite of investors who pursue riskier high yielding assets in other countries.