Dollar hits new depths, stocks rise

Fri Nov 23, 2007 4:48am EST

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) – The dollar plumbed record lows against major currencies on Friday and briefly got close to $1.50 to the euro as concerns about the U.S. economy rattled investors but Asian and European stocks advanced.

But a gloomy prognosis for the euro zone from a European Central Bank member later toppled the euro well off its highs, down to $1.4828, from a record high of $1.4966.

Trading was thinner than usual with Japanese markets closed for a holiday and Wall Street likely to see absentees the day after Thanksgiving.

The dollar’s ongoing decline, however, was in full focus. It fell to an all time low against a basket of six major currencies (.DXY: Quote, Profile, Research), essentially its weakest position globally since the modern currency regime began in the early 1970s.

Elsewhere, the dollar hit an all-time low against the Swiss franc and was at 2-1/2 year lows against Japan’s yen.

“They are selling the dollar against safe havens,” said UBS currency strategist Mansoor Mohi-uddin. “(There are) fears about the U.S. economy and worries that U.S. interest rate cuts will be front loaded while rate cuts in the rest of the world will take longer to materialize.”

Lower U.S. interest rates make the dollar less attractive to investors.

One key to the future direction of the euro and dollar will be the state of the euro zone economy.

Bank of Spain Governor and European Central Bank council member Miguel Angel Fernandez Ordonez said that while there were some medium-term inflation risks in the euro zone, world financial turmoil threatened a stronger-than-expected slowdown.

“The comments re-emphasize that while the market has been preoccupied with U.S. economic weakness the U.S. is not alone in suffering and the euro zone will struggle or at least decelerate next year as well,” said Jeremy Stretch, market strategist at Rabobank.

But there were mixed signals on the data front, with growth in the euro zone’s dominant services sector falling more than expected as new orders slipped, but the manufacturing industry staged an unanticipated rebound.


European shares rose, helped by a fresh wave of merger talk in the financial and mining sectors.

The FTSEurofirst 300 index (.FTEU3: Quote, Profile, Research) of top European shares was up 0.7 percent, having rallied the same on Thursday.

The strong euro, however, was lurking in the background.

“Obviously with the euro at $1.49 plus … people may come back to which sectors are exposed and that is bad news for autos, aerospace and defense,” said Edmund Shing, a strategist at BNP Paribas in Paris.

The chief executive of European planemaker Airbus Tom Enders, told employees on Thursday that the weak dollar was threatening the survival of the company.

Euro zone government bond prices were flat.

The two-year Schatz yield was at 3.61 percent and the benchmark 10-year Bund yield was at 4.02 percent.

Comment on Global Research Articles on our Facebook page

Become a Member of Global Research

Articles by: Global Research

Disclaimer: The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible for any inaccurate or incorrect statement in this article. The Centre of Research on Globalization grants permission to cross-post Global Research articles on community internet sites as long the source and copyright are acknowledged together with a hyperlink to the original Global Research article. For publication of Global Research articles in print or other forms including commercial internet sites, contact: [email protected] contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to our readers under the provisions of "fair use" in an effort to advance a better understanding of political, economic and social issues. The material on this site is distributed without profit to those who have expressed a prior interest in receiving it for research and educational purposes. If you wish to use copyrighted material for purposes other than "fair use" you must request permission from the copyright owner.

For media inquiries: [email protected]