Carry traders given blank check on dollar weakness

The dollar, already plumbing its lowest levels of the year, is expected to continue to weaken even as an improving U.S. economy eventually leads the Federal Reserve to unwind more of its liquidity-boosting programs.

That's because the U.S. currency has increasingly been at the center of a so-called carry trade. With interest rates effectively at zero in the U.S., global investors seeking risks and higher returns are increasingly borrowing risk-free dollars to invest in higher-yielding currencies and assets, such as stocks, commodities, and emerging markets. (more)