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Dollar slides, fuelling commodity price hikes
2009-10-14
LONDON (AFP) - The dollar slumped to a 14-month low against the euro on Wednesday, pushing the price of gold to a record high and crude oil futures above 75 dollars for the first time in a year. The euro struck 1.49 dollars -- its highest point since August 2008 -- on increased appetite for currencies seen as riskier than the dollar and on prospects for super-low US interest rates in the face of rising economic confidence, analysts said. In morning London trade, the European single currency jumped to 1.4913 dollars, which was last seen in August 2008. It later stood at 1.4895 dollars, up from 1.4852 dollars late in New York on Tuesday. The dollar fell to 89.20 yen from 89.67 on Tuesday. "I think 1.50 dollars is the next target (for the euro) and we will probably see it very soon," said GFT Global Markets analyst David Morrison. He added that traders also believed that the US Federal Reserve would keep US interest rates close to zero for the foreseeable future. "Investors are focused on belief that Fed will keep rates unchanged for a long time yet," Morrison said. "Also, whatever Fed and US Treasury say, the market believes that US administration is happy to see dollar weaken. They just want to make sure it does it gradually." Morrison said the US government backed a weak dollar because it reduces the value of the country's debt and makes US exporters more competitive. The dollar's sharp fall meanwhile sent the price of New York-traded crude oil above 75 dollars a barrel and to the highest level for almost 12 months. New York's main contract, light sweet crude for delivery in November soared to 75.15 dollars a barrel, which was last seen on October 20, 2008. The contract later stood at 74.91 dollars, up 76 cents from the closing level on Tuesday. Brent North Sea crude for November delivery advanced 69 cents to 73.09 dollars a barrel in London on Wednesday. "Oil prices continued to rise while the dollar fell to a 14-month low," analysts at JBC Energy consultancy said in a note to clients. A struggling greenback boosts demand for dollar-denominated commodities such as oil when they become cheaper for foreign buyers holding stronger currencies. "We expect a further fall of the US currency over the next two weeks," said Dariusz Kowalczyk, chief investment strategist with SJS Markets financial services firm in Hong Kong. Expectations that the dollar will continue to languish against the euro and other major currencies will continue to boost the crude market, analysts said. Investors have sought to protect themselves against the greenback's fall by buying other hard assets such as gold, whose price on Wednesday leapt to a record peak above 1,070 dollars an ounce on the London Bullion Market "Investment flows continue to buoy commodity prices," said James Moore, analyst at specialist website thebulliondesk.com. In London on Wednesday, the euro was changing hands at 1.4895 dollars against 1.4852 dollars late on Tuesday, at 132.84 yen (133.22), 0.9313 pounds (0.9326) and 1.5169 Swiss francs (1.5174). The dollar stood at 89.20 yen (89.67) and 1.0187 Swiss francs (1.0214). The pound was at 1.5989 dollars (1.5925). On the London Bullion Market, the price of gold jumped to 1,066.25 dollars an ounce from 1,070.80 dollars an ounce late on Tuesday.
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