Tuesday July 15, 2008 - 21:05:40 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar dives to record low vs euro, curbs losses on oil
(Recasts; updates prices, adds byline)
* Dollar falls to record low against the euro
* Oil price's sharp drop curbs dollar's losses
* Bernanke give grim assessment of financial sector
By Lucia Mutikani
NEW YORK, July 15 (Reuters) - The dollar fell to a record
low against the euro on Tuesday amid persistent fears over the
health of the U.S. financial institutions, with Federal Reserve
Chairman Ben Bernanke giving a grim assessment of the sector.
But crude oil's largest price drop in 17 years briefly
diverted investors' attention away from the troubles in the
financial sector, helping the dollar to pull back from the
historic troughs and regain some ground versus the yen.
Bernanke told the Senate Banking Committee that financial
markets and institutions remained under "considerable stress"
and restoring stability was a top priority for the central
bank. For details, see [ID:nN15297955]
Separately, U.S. Treasury Secretary Henry Paulson testified
before the committee that distressed housing finance giants
Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) and Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) had potential to
pose systemic risks to the financial system.
"Oil came off substantially today, which was a huge boost
for everything dollar-related," said Boris Schlossberg, senior
currency strategist at DailyFX in New York.
"We don't think the storm has passed, authorities are just
putting out one fire after the other. As soon as risk aversion
returns back to the market, the euro will resume its safe haven
bid status," he said.
The euro jumped to a record peak of $1.6037, according to
Reuters Dealing data <EUR=D2>. In late New York trade, the euro
was flat at $1.5902.
The dollar got a brief boost from a surge in Wall Street
stocks as oil dropped as much as $9.26 a barrel on speculation
sluggish U.S. economic growth could curtail demand. But renewed
financial worries took the steam out of the U.S. stock market
rally as the Dow Jones industrials ended below 11,000 for the
first time since July 2006.
Against a basket of six currencies, the dollar fell to a
three-month low of 71.314 .DXY, but later recovered to around
71.746, down about 0.3 percent on the day.
Sagging global stock markets sent investors toward the
safe-haven Japanese yen. The dollar fell as low as 104.17 yen
<JPY=>, its third consecutive day of declines. It last traded
at 104.76 yen, down 1.3 percent. The euro fell 1.4 percent to
166.55 yen <EURJPY=>.
Analysts said the mood for the dollar remained grim as
investors fretted that the credit crunch, sparked by the U.S.
housing market crisis, still had a long way to go.
"(There is) no end to dollar negative sentiment and the
inclination to sell any dollar upticks, notably against the
most obvious 'flight-to-quality' plays, the Swiss franc and the
yen," said Alan Ruskin, chief strategist at RBS Global Banking
& Markets in Greenwich, Connecticut.
Elsewhere, the Australian dollar hit a 25-year high against
the U.S. dollar of US$0.9851 <AUD=D2>, according to Reuters
Dealing, after minutes of the Reserve Bank of Australia's July
meeting showed the central bank remained concerned about
This suggested it will likely keep rates at a 12-year high
and may even hike again.
The U.S. currency also fell below parity to the Canadian
dollar for the first time in 1-1/2 months <CAD=>. It last
traded at C$1.0014, down 0.5 percent after the Bank of Canada
left its benchmark rate unchanged at 3 percent.
(Additional reporting by Nick Olivari; editing by Gary
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