Dollar Weakens, Gold Surges In Early European Trade
By Martin Essex, Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- The dollar weakened further in early European business
Thursday as traders continued to adjust to the prospect that U.S. interest rates
are likely to remain low for many more months. Meanwhile, gold prices hit fresh
record highs, but the oil price eased back.
The dollar "has continued to come under further pressure... as it slumped
across the board against a basket of currencies hitting levels last seen in
early 2008," said Michael Hewson, analyst at CMC Markets.
"The dollar was additionally undermined by the decision of the Russian central
bank to add Canadian dollars to its reserves to reduce its exposure to the
greenback, the break through parity against the Swiss franc, 14-year lows
against the yen, and the surging gold price, which gained further on rumors that
India may add to its October purchases," he added.
The dollar hit a 14-year low at 86.29 Japanese yen before rising to Y86.80 at
0750 GMT, still down from Y87.35 in late New York business Wednesday. The dollar
index, measuring its value against a basket of currencies, hit a 15-month low at
74.17.
Meanwhile, the euro hit a five-month low against the Swiss franc before
rallying sharply, sterling weakened and gold hit a new high at $1,195.50 per
troy ounce. But January Nymex crude oil futures dipped briefly below $77 per
barrel before stabilizing.
"The dollar's sharp declines have driven it either through or towards some
critical levels against other currencies, with USD/CHF in particular pushing
through parity for the first time since April 2008," said Gareth Berry at UBS.
"Some other major pairs, such as USD/CAD and AUD/USD, are also approaching the
parity mark, and could make further inroads in the next few days when holiday
conditions are likely to constrain liquidity," he added.
Dubai World's problems may also have hit the dollar Thursday. "The catalyst
was the move by Dubai World late yesterday to seek a delay in debt payments. The
main rating agencies are still considering whether such a move would constitute
a default," said Royal Bank of Canada, in a note to clients. "News of Dubai
World's expression of intent to seek a standstill and potential restructuring of
its external liabilities is a significant negative surprise for the market,"
added Royal Bank of Scotland.
-By Martin Essex, Dow Jones Newswires; +44-20-7842-9464; martin.essex@
dowjones.com
(END) Dow Jones Newswires
11-26-090333ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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