The dollar sell-off has gained momentum. The dollar index, which tracks the greenback against a basket of major trading partners' currencies, slid by almost 2% last week to a 12-month low. The dollar has also hit a nine-month low against the euro. Mounting global risk appetite has reduced the appeal of the dollar as a safe haven, while the Fed's money-printing and the towering budget deficit have also undermined confidence in the dollar.
But there's another reason the dollar has weakened: it is now "the big funding currency" for the carry trade, says Jonathan Clark of FX Concepts. As they did with the yen, investors are borrowing dollars at tiny interest rates, selling them and parking the money in higher-yielding currencies.
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