US Dollar Index on winning streak higher, rally not seen since the 1980?s

The US Dollar Index is on a winning streak higher in currency trading this morning, rising for a 14th session, its longest rally since 1985 as the euro falls further into uncharted territory with more talk of Greece returning to the drachma.

On A Rally – Dollar Index

The ICE US Dollar Index, which tracks the US dollar against six major world currencies was trading at 81.565 – 09.47 GMT today, from the session open of 81.504.

Euro Battering

The euro has suffered a serious battering this week, tumbling to a four month low of $1.2747 against the US dollar on Wednesday, May 16, as investors study the Greek situation with a growing sense of unease and reports emerge of Greek depositors withdrawing funds from Greek banks as the country’s fate hangs precariously in the balance.

Meanwhile, the European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as President Mario Draghi signaled the ECB won’t compromise on key principles to keep Greece in the euro area.

Steen Jakobsen from Saxo Bank said outflows from Greek banks are becoming unstoppable, not helped by open talk in EU circles of `technical’ plans for Greek withdrawal.

“This has a self-fulfilling prophecy built into it and I don’t think we can get to June. The fuse is burning and the only two options now are a controlled explosion where Germany steps in to ensure an orderly exit, or an uncontrolled explosion,” he said.

Banking giant JP Morgan believe that Greek banks have already exhausted their collateral. A refusal by the ECB to ease rules would amount to expulsion, forcing Greece “to issue its own money.”

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US Dollar Index on winning streak higher, rally not seen since the 1980?s