Dollar Falls to Within Cent of All-Time Low
Posted by Harold Kent on July 12th, 2008
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The dollar dropped to within a cent of the all-time low against the euro on concern losses at Fannie Mae and Freddie Mac may deepen even after policy makers said the companies aren’t facing a government takeover.
Crude oil rose to a record above $147 a barrel.
“Risk aversion is biting the dollar given the concern surrounding Fannie and Freddie,” said Steven Englander, a currency strategist at Lehman Brothers Holdings Inc. in New York, who covers the 10 biggest industrialized nations. The dollar fell 1.5 percent this week to $1.5938 per euro, from $1.5706 on July 4. It touched $1.5947 yesterday, the weakest since April 23. The dollar reached the all-time low of $1.6019 the previous day.
The U.S. currency dropped 0.5 percent to 106.28 yen, from 106.80 on July 4. The yen fell 1 percent to 169.46 per euro, from 167.73, after touching 169.63, the highest since the European currency’s 1999 debut. The Australian dollar appreciated 0.3 percent from a week earlier after touching 97.18 U.S. cents yesterday, the strongest level since 1983.
South Korea’s won rose 4.5 percent this week to 1,002.70 per dollar, the biggest gain since March 1998, as policy makers pledged to shore up the currency and tame inflation.
Dollar Index
The Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six U.S. trading partners, dropped 0.9 percent to 72.096 this week. “The dollar cracked given the concern Fannie and Freddie are under heavy pressure,” said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. The companies defended their finances.
`Ugly Quagmire’
Crude Oil
A 10 percent increase in oil prices leads to a 1 percent appreciation of the euro against the dollar, according to a study by David Woo, London-based global head of currency strategy at Barclays Capital.
European Inflation
The ECB “is set to continue to hike interest rates on rising inflation,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon in a Bloomberg interview.
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