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Euro, yen soar as dollar is pounded

FRANKFURT: Widespread concern over the outlook for the U.S. economy pushed the euro to a new record and the yen to 12-year highs against the U.S. dollar on Thursday, while gold and oil prices also surged.

The euro pushed to an all-time high of $1.5625 in European trading, beating a day-old record of $1.5559 — before declining to $1.5572 even as a new report showed American retail sales falling in February. That was still above the $1.5526 it bought in New York last Wednesday.

The dollar dropped below 100 Japanese yen for the first time since November 1995. It traded as low as 99.75 yen before recovering some ground to 101.68 yen, compared with Wednesday’s level of 102.04 yen. Japanese leaders quickly cautioned against instability in currency markets, but made no mention of any intervention to stem the dollar’s slide.

“The latest blow to the dollar and world bourses intensified in early European trade when Carlyle Capital Corp. said ... it expected creditors to seize all of the fund’s remaining assets after unsuccessful negotiations to prevent its liquidation,” said Ashraf Laidi, chief foreign exchange strategist for CMC Markets in New York. “The continued damage in the mortgage-backed securities market dealt a blow to Carlyle’s collateral, all of which was AAA rated.”

That caused a wide sell-off on markets from Tokyo to London and prompted currency traders to sell their dollars.

The euro’s rush also pushed oil higher, with prices rising to new trading highs above $110 a barrel on Thursday. Meanwhile, April gold futures touched $1,000 an ounce in trading.

The dark economic outlook has raised expectations that the U.S. Federal Reserve will continue to cut interest rates — even as the European Central Bank sticks to a tough anti-inflation stance and signals that no rate cuts are on the way for the 15-nation euro zone from its current 4 per cent level.

Lower interest rates can jump-start a nation’s economy, but can also weigh on its currency as traders transfer funds to countries where they can earn higher returns. — AP

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