Source: The Wall Street Journal                      Date: 13 April, 2011

The beleaguered greenback won a reprieve from the last-gasp agreement averting a shutdown of the U.S. Government, but many investors remain inclined to punish the dollar. Away from Washington, most market signs still point to further declines for the greenback.

The main problem for the dollar continues to be that the U.S., like Japan, continues to be perceived as a laggard when it comes to raising interest rates. Investors are still concerned about the Fed's so-called quantitative-easing bond-purchase plan, which has weighed on the dollar for months and goes through June.

Loose monetary policy has contributed to rising global inflation. Central banks have responded by raising rates, making assets denominated in other currencies more appealing. Last week, the European Central Bank raised interest rates by one-quarter of a percentage point.

In response to this overall dynamic, last week was a bad one for the dollar. The euro rose to its highest levels since January 2010, and the dollar fell further against higher-yielding currencies, such as the Australian dollar, which hit its highest level against the greenback since the currency began to float freely in 1983. The dollar even lost slightly to the yen on Friday, despite predictions by many analysts of lasting damage to Japan's economy from its multiple disasters. Late Friday, the euro was at USD1.4457, compared with USD1.4223 a week ago. With the dollar so beaten down, some analysts say it can't slip much further. Still, another round of dollar selling may be on the way—the result of continued wrangling in Washington.