New trading year, new 2009 low for the dollar

The dollar slid to a yearly low versus the euro and British pound Tuesday, as the new trading year began as institutional investors returned from summer vacations. Even so, the compelling question for foreign currency traders remains unresolved: will the dollar's slide continue?

The dollar weakened about one cent to $1.4487 and $1.6525 against the euro and British pound, respectively, on sentiment that a global recovery will lead to a move out of the dollar and into higher-returning emerging market investments. The dollar also fell about one yen to 92.99 Japanese yen, and about about 1.5 cents to $1.0431 versus the Swiss franc.

Dollar bears argue that more dollar doldrums are ahead. They say demand for capital abroad, the prospect for only modest capital gains in the U.S., and the U.S.'s large budget deficit will place more pressure on the greenback in the months and quarters ahead.