Dollar mostly stronger, but euro holds above $1.50

Dollar mostly stronger, but euro holds above $1.50
Dollar moves mostly higher amid weak stock markets; euro holds above $1.50
By Tali Arbel, AP Business Writer
On 12:58 pm EDT, Friday October 23, 2009


NEW YORK (AP) -- The dollar recovered from a fresh 14-month low against the euro on Friday after a pullback in U.S. equity markets spurred some greenback buying.

In midday trading, the 16-nation euro was at $1.5035 down from a new 14-month high of $1.5060 in overnight dealings. It changed hands at $1.5026 late Thursday.

The buck has taken a beating lately as strong earnings from some U.S. drug, technology and manufacturing companies spurred investors to sell the low-yielding "safe" dollar and buy riskier currencies that give higher returns.

That's been the ongoing trend since spring, as investors feel more comfortable with the idea of a global recovery from the recession. Instead of keeping money parked in super-safe U.S. Treasurys, they have been hunting for riskier investments that have the potential for bigger payoffs.

The euro broke above the psychologically important level of $1.50 on Wednesday for the first time since August 2008, despite statements of support from European finance ministers and European Central Bank officials in favor of a strong dollar.

But on Friday, a sense of caution gripped markets after mixed results from major corporations this week. The Dow industrials were down about 85 points at 9,996 in early afternoon trading. That helped the dollar.

The dollar rose to 91.87 Japanese yen from 91.29 yen. The British pound tumbled to $1.6347 from $1.6624 after the government unexpectedly said the U.K. economy shrank 0.4 percent in the third quarter. Economists had mostly expected slight growth.

That means the British government is likely to leave interest rates at an extremely low 0.5 percent, said Michael Woolfolk, senior currency strategist at Bank of New York Mellon Corp. Meanwhile, he said he expects the Federal Reserve will raise rates from their current rock-bottom range near zero early next year. Most economists expect the Fed to start hiking rates later in the year, probably in midsummer or early fall.

Raising U.S. interest rates would make the dollar more appealing to traders, because it would cause the assets priced in dollars to have higher returns.

In other New York trading, the dollar rose to 1.0507 Canadian dollars from 1.0486 late Thursday, and gained to 1.0060 Swiss francs from 1.0048 francs.