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U.S. Dollar Retains Soft Tone Amid Sluggish Economy
The Indian rupee and Chilean peso led gains among global currencies in carry trade performance during the third quarter, posting returns in excess of 7% against the U.S. dollar, CME Group analysts said in a report. Other strong performers included the Russian ruble, which returned 5.7% against the dollar, and the Mexican peso, up 4.9%, during the quarter, according to the latest Currency Market Monitor, which was written by CME directors John Labuszewski and Sandra Ro and Chief Economist Blu Putnam. The South African rand was the only currency among 20 studied to lose value against the dollar, reflecting a sluggish U.S. economy and a renewed "risk on" attitude as Europe's financial crisis appeared to stabilize. Carry trades involve borrowing in nations with low interest rates to invest in higher-rate countries. CME Group analysts also identified the Norwegian krone as the most overvalued currency relative to the dollar, followed by the Swiss franc and the Australian dollar. Highly under-valued currencies included the Polish zloty, the Hong Kong dollar and the Mexican peso.