Dollar hits low for year as gold tops $1,000

Dollar hits low for year as gold tops $1,000 an ounce
By Tali Arbel, AP Business Writer
Tuesday September 8, 2009

NEW YORK (AP) -- The dollar fell to a low for the year Tuesday as gold prices shot past $1,000 an ounce and investors switched funds into riskier investments. Commitments from global leaders this weekend to continue underwriting the global recovery helped drive investors away from the "safe haven" dollar and into emerging-market currencies and equities, analysts said. The 16-nation euro rose as high as $1.4498 in morning trading, its strongest level this year, from $1.4337 late Monday. The British pound rose to $1.6547 from $1.6335, while the dollar dropped to 92.15 Japanese yen from 92.96 yen. The dollar index fell as low as 77.10 against a basket of six major world currencies that includes the euro, yen, Canadian dollar, British pound, Swedish krona and Swiss franc. That's its lowest since last September.

Markets have been rising after finance officials from the Group of 20 leading economies pledged to maintain government spending, low interest rates and expansion of the money supply in order to buck up the global economy. The ministers met this weekend in London. Those moves could help boost economic activity and liquidity in financial markets, but can weigh on the value of a currency. The current U.S. rate near zero means investors can earn better returns on their funds in countries with higher yields, such as, for example, Poland, Turkey, Brazil and Australia.

"People are loading up on high-yielders," said Win Thin, senior currency strategist at Brown Brothers Harriman in New York, as they get more optimistic about the global economy's growth outlook. The price of gold, meanwhile, shot past $1,000 an ounce for the first time since February. Gold for December delivery peaked at $1,009.40, the highest since March 2008, on the New York Mercantile Exchange. Gold is often used as a hedge against inflation and a weak dollar. A report from a United Nations agency released on Monday also called for a reduced role for the dollar as the world's primary reserve currency. Investors could also have been weighing a report from the U.N. Conference on Trade and Development, released Monday, which called an international monetary system that relied on a national currency as a reserve asset a "weakness."

China and Russia have been vocal this year about the need to diversify reserves away from the dollar as its value dropped. Chinese officials have called for the creation of a new global reserve currency by the International Monetary Fund. Some positive data out of Europe also helped bolster the euro. German exports rose 2.3 percent in July, their third consecutive monthly improvement, according to official German statistics. After a 6.1 increase in June, it's further evidence that Europe's biggest economy is on the mend. Other currencies also climbed against the dollar, especially those in countries which are major exporters of commodities, as oil prices gained more than $2. A strong economy would use more commodities in factories and transportation. The New Zealand dollar hit its strongest point since last September at 69.83 U.S. cents, while the Australian dollar peaked at 86.51 U.S. cents, its highest level in more than a year. The dollar dropped to 1.0723 Canadian dollars from 1.0763 and tumbled to 1.8242 Brazilian reals from 1.8445 reals late Monday.

In other trading, the dollar hit a low for 2009 against the Swiss franc at 1.0429 on Tuesday, down from 1.0597 late Monday.