The ugliest currency of them all?

Mirror, mirror on the wall, which is the ugliest currency of them all?

The dollar, fair in the winter turmoil, the markets’ safest bosom, is looking unattractive again. It has slumped from highs of $1.25 per euro in March to $1.38 this week.

But in a world enduring the worst slump since the 1930s — belied by insanely exuberant markets — none of the major currencies look attractive.

The US central bank isn’t alone in printing money to stave off the threat of deflation. And if markets regain their sensitivity to risk, the greenback could easily start to look tempting once more.

For now, the dollar doesn’t appear to have anything going for it. The US Federal Reserve has cut its benchmark interest rate virtually to zero. Worse, it is printing money and using the freshly minted cash to buy US Treasuries.

The Chinese, the US’s biggest foreign creditor, have made it quite clear that they take a dim view of this “policy mistake”, as China's central bank put it. Undeterred by eastern frowns, some Fed governors have been gunning for even more money creation to buy bonds, according to the minutes of the last Federal Reserve meeting.

The dollar’s fall also coincides with what some currency traders call the reflation trade: the huge rally in equities and riskier assets since their nadir in March.

Convinced that the world is remarkably repaired, investors have been happy to speculate again. The British pound has been a beneficiary, rising on May 21 to a high against the dollar this year of $1.58. But a downgrade of the UK’s outlook by Standard & Poor’s has just taken the wind out of the pound’s sails.

The rating agency’s assessment is a timely reminder that it is not just the US which is running a double-digit government deficit, doubling its debt in the space of a few years and praying that money printing — £125 billion in the UK's case — will generate economic recovery.

The euro, too, has been winning admirers. Yet its previous chaste appeal — in the form of German opposition to money printing — has been tarnished a little by the European Central Bank’s decision to buy E60bn of covered bonds.

The ECB considered buying more than twice that, according to Bloomberg. That is hardly surprising given the eurozone’s slump is so shockingly deep. The German economy shrank 6.7 per cent in the first quarter from a year before. The comparable dip in the US was 2.6 per cent. Now which currency is the ugliest of them all?