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Osama-Obama and Forex. Will the buck swing back ?

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.

Something to think about....

The currency was due for a corrective rebound, dealers said, with players 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.

Their euro long positions rose to 68,279 contracts, the highest since December 2007, from 62,195 contracts the previous week.

The euro stood at $1.4792 , down 0.1 percent on the day and off a 17-month high of $1.4882 hit last week.

The Australian dollar had a rollercoaster ride, falling about 0.2 percent , after marking a 29-year high of $1.1011.

The U.S. dollar slipped rose 0.4 percent to 81.50 yen after having fallen to a fresh one-month low of 81.05 yen in early Monday trade.

Some players are ready to buy the dollar above 80.90 yen, a 50 percent retracement of its rise from a record low of 76.25 to a high of 85.53 hit in early April, market players said.

The dollar also gained 0.5 percent against the safe-haven Swiss franc to 0.8694 franc on the news of bin Laden's death

Let us wait and see, comrades.  Will that pendulum swing back ?


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