Business | Oil & Gas
Dollar recovers amid declining oil prices
Euro on track for its best weekly gain against the greenback since mid-July despite losses.
- Reuters
- Published: 19:22 August 22, 2008
New York: The US dollar on Friday recovered from the previous day's losses, buoyed by a pullback in oil prices, stock market gains and an ailing pound after growth data strongly suggested a recession in Britain.
"The dollar is getting a knee-jerk reaction to the fact that we're getting a bit of a push-up in equities. Oil and gold have also come off and helped the dollar," said Tom Fitzpatrick, global head of forex strategy at CitiFX in New York.
"The forex market continues to trade closely with commodities."
In midday New York trading, the euro was down 0.7 per cent at $1.4794, edging toward a six-month low hit earlier this week at $1.4631, according to Reuters data.
Despite Friday's losses, the euro was on track for its best weekly gain versus the dollar since mid-July.
Earlier, the dollar briefly trimmed gains versus the euro after Federal Reserve Chairman Ben Bernanke, who spoke at an annual Fed symposium in Jackson Hole, Wyoming, said a stable dollar and falling commodities should help slow inflation this year and next..
His remarks prompted analysts to reduce expectations of a US interest rate increase this year, which could diminish the dollar's appeal to investors.
"[Bernanke's] expectations that inflation will ease again suggest no urgency to remove accommodation ... [and this] plays into the notion that the Fed is on hold for the foreseeable future," said Brian Dolan, chief currency strategist, at Forex.com in Bedminster, New Jersey. "His positive comments on the dollar aside, the rate implications of his remarks are dollar-negative."
Still, the Fed chairman's comments failed to stall the dollar's advance. The dollar rose 1.4 per cent to 109.85 yen, inching back toward a nearly eight-month high of 110.66 yen touched a week ago.
The greenback was on pace for its best one-day gain against the yen in more than two months at current prices.
Losses in sterling also helped the dollar regain its footing. The pound fell sharply after the UK economy posted its weakest performance since the recession of the early 1990s.
The poor UK growth numbers added to an overall bleak picture of a slowing European economy, increasing the possibility of European Central Bank and Bank of England monetary easing.
Sterling slid 1.4 per cent to $1.8523. The pound's losses helped fuel a 0.9 per cent gain in the dollar versus a basket of major currencies to 76.695, not far from its 2008 peak at 77.413 hit early this week.
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