Dollar Plummets in the wake of Hurricane

The USD has taken a nosedive, as investors and traders continue to assess the economic impact of Hurricane Katrina. There is the direct effect of lost productivity in the affected regions, as well as the peripheral consequence of higher commodity prices. Short term energy futures have soared in the last week, as markets brace for shortages. Bond traders have already priced an expected rate increase out of bonds, meaning they no longer expect Alan Greenspan to raise interest rates at the next Fed meeting. Currency traders responded to the news of a weaker economy by punishing the USD, which has fallen 2% in as many days. The Financial Times reports:

Worries about the US economy had been reinforced earlier by data that showed the US economy was already under the pressure of rising energy prices even before Katrina struck.

Read More: Dollar hit by US growth fears