Dollar gains on global credit jitters
Sunday, 29 July 2007
NEW YORK, July 28 (AFP): The dollar gained on the euro yesterday, as investors turned to the greenback as a safe haven amid fears of a looming global financial credit crunch.
The single European currency was at 1.3632 dollars around 2100 GMT, down from 1.3743 dollars late Thursday.
The euro-dollar trade was volatile this week, with the euro hitting a record high of 1.3852 dollars Tuesday and falling as low as 1.3628 dollars Friday, its lowest level in more than two weeks.
The dollar, meanwhile, was at 118.60 yen compared with 118.68 Thursday.
In late New York trade, the dollar was at 1.2082 Swiss francs, up from 1.2032.
The pound stood at 2.0240 dollars, down from 2.0484.
Analysts said that investors, anxious that a credit squeeze brought on by a sharp deterioration in the key US housing market was about to materialise, were dumping shares for a second day in a row amid shrinking appetites for risk.
Analysts are concerned that the faltering US housing sector will hurt banks and finance companies enough to curb the availability of credit on which the world economy feeds.
That, in turn, could hurt private equity groups because their takeover bids are often financed by large amounts of bank debt.
Under such circumstances the dollar was finding favor as a safe-haven currency, notably as investors fear that weakness in the US subprime market, where defaults were rising on loans made to people with risky credit, could spread to Europe and elsewhere.
The dollar eased a bit at one point Friday after a larger- than-expected fall in core US inflation offset a robust set of second-quarter economic growth figures. Lower inflation suggests that the US Federal Reserve will not raise interest rates any time soon, thereby putting downward pressure on the US currency.
The single European currency was at 1.3632 dollars around 2100 GMT, down from 1.3743 dollars late Thursday.
The euro-dollar trade was volatile this week, with the euro hitting a record high of 1.3852 dollars Tuesday and falling as low as 1.3628 dollars Friday, its lowest level in more than two weeks.
The dollar, meanwhile, was at 118.60 yen compared with 118.68 Thursday.
In late New York trade, the dollar was at 1.2082 Swiss francs, up from 1.2032.
The pound stood at 2.0240 dollars, down from 2.0484.
Analysts said that investors, anxious that a credit squeeze brought on by a sharp deterioration in the key US housing market was about to materialise, were dumping shares for a second day in a row amid shrinking appetites for risk.
Analysts are concerned that the faltering US housing sector will hurt banks and finance companies enough to curb the availability of credit on which the world economy feeds.
That, in turn, could hurt private equity groups because their takeover bids are often financed by large amounts of bank debt.
Under such circumstances the dollar was finding favor as a safe-haven currency, notably as investors fear that weakness in the US subprime market, where defaults were rising on loans made to people with risky credit, could spread to Europe and elsewhere.
The dollar eased a bit at one point Friday after a larger- than-expected fall in core US inflation offset a robust set of second-quarter economic growth figures. Lower inflation suggests that the US Federal Reserve will not raise interest rates any time soon, thereby putting downward pressure on the US currency.