The dollar tumbled on Wednesday, hitting its lowest in more than 13 years versus the yen and also falling against the euro, one day after the Federal Reserve's historic rate cut.
As you likely know, the Fed on Tuesday cut its federal funds rate target to a record low, setting a range of zero to 0.25 percent compared with the previous level of 1.0 percent, and said it would use "all available tools" to battle recession.
The massive cut further diminished the greenback's yield appeal against the euro, which has registered a staggering 11 percent gain so far during the month.
"The underlying story in the FX market remains yield. The fact that the Fed made this major policy move yesterday really changed the balance of power towards the euro for the time being," says Boris Schlossberg, director of currency research at GFT Forex.
According to strategic investor Dennis Gartman the Fed is doing exactly what needs to be done. The dollar might be getting weak but it's not collapsing.
He tells us, "(The Fed) has led the rest of the world and Europe has no choice but to follow. I expect that ECB Chief Trichet will do the same thing and cut rates aggressively. We just went down the road first."
So what then is Gartman's trading theory?