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Dollar, euro hold in narrow ranges as prospects darken
LONDON
Petroleumworld.com, November 21, 2008The dollar and euro held to narrow ranges Thursday against a darkening economic backdrop which sparked another round of very heavy losses on global markets.
Dealers said the dollar benefited from its safe-haven attributes, reflected in continued fund flows into the US unit even though the United States is the epicentre of the financial crisis that has laid the world low.
At the same time a series of unrelenting bad US data gives players pause for thought about putting all their eggs in the US basket -- on Thursday, figures showed US jobless claims soaring to a 16-year high as the economy slumps.
At the same time, the prospect that the European Central Bank will continue to be slower to cut interest rates than its US and British peers offered some support for the euro.
In late London trade, the euro was at 1.2521 dollars, down from 1.2527 dollars earlier but up from 1.2508 dollars in New York late on Wednesday.
The dollar fell to 94.83 yen from 95.77 yen on Wednesday.
Global stock markets tumbled on Thursday, with Tokyo losing nearly seven percent and European markets shedding three and four percent as mounting job losses pointed to more pain ahead.
The prospect that one of the three top US automakers -- General Motors, Ford and Chrysler -- could go broke appeared to increase Wednesday when their pleas for additional help from Congress failed to make any ground.
Dealers said the possibility of such a bankruptcy actually helped the dollar because investors believe that despite all the problems it is still a safer bet, alongside the yen, than any of the others.
"The euro's spike to an intra-day high of 1.2814 dollars (Wednesday) was fleeting and the collapse of the US equity markets has driven investors back to the two currencies that have performed best throughout the current financial market turmoil -- the dollar and the yen," said Derek Halpenny at Bank of Tokyo-Mitsubishi.
New York stocks had plunged to five-and-a-half-year lows on Wednesday after data revealed a sharp deterioration in the world's largest economy and the Federal Reserve admitted the risk of a long recession.
The yen managed to shrug off news that Japanese exports dropped at the fastest pace in almost seven years, pushing Asia's largest economy deeper into recession.
In late trade on Thursday, the euro changed hands at 1.2521 dollars against 1.2508 dollars late on Wednesday, at 118.82 yen (119.82), 0.8473 pounds (0.8356) and 1.5280 Swiss francs (1.5163).
The dollar stood at 94.83 yen (95.77) and 1.2198 Swiss francs (1.2119).
The pound was at 1.4786 dollars (1.4960).
On the London Bullion Market, the price of gold fell to 738 dollars an ounce from 762 dollars late on Wednesday.
Story from AFP
AFP 20 1728 GMT 11 08
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