Euro, oil hit record on fears about the US housing market fallout - extended
Fears about the economic fallout from the US housing market have helped to drive the euro and oil to all-time highs. Oil passes $98 on weaker dollar.
Just one day after the euro charged past the key $1.45 mark, the euro breached the 1.46 level Wednesday to hit a new record of $1.4666 as it rushes towards the next major barrier of $1.50. At the same time, the oil price surged to over $98 a barrel as it heads for the $100-a-barrel mark and gold soared to a 27-year high as the greenback slumped. Adding to the weak outlook for the dollar are growing expectations that the US Federal Reserve will be forced to cut rates again and comments by a leading Chinese official indicating that Beijing’s monetary authorities might be considering stocking up on strong performing currencies.
By mid-morning trading in Europe Wednesday, the common currency was hovering around $1.4656 with the euro having gained about 10% again the greenback since the start of the year. The dollar was also trading at a 26-year low against the pound. But despite concerns about the impact of the strong currency on the 13-member eurozone’s key export machine, shares in Europe crept up in morning trading with the benchmark Eurostoxx 50 gaining a modest 0.2%. The euro has been springing from one record high to another in recent months with the common currency’s latest rise coming in the wake of growing fears that the surge in defaults in the risky US mortgage business could result in more big losses for the global banking sector.
This in turn has raised the prospect of the Federal Reserve trimming rates again possibly as early as December in a bid to shore up investor confidence. The latest surge in the euro also comes as part of the buildup to Thursday’s European Central Bank meeting. With eurozone inflation hitting a two-year high, ECB chief Jean-Claude Trichet is likely to talk tough on the threat posed by renewed inflationary pressures at his regular monthly press conference after the meeting of the bank’s governing council.
The jump in eurozone inflation follows a rise in both oil and food prices with some analysts now pencilling a 3% inflation rate for the currency zone in the coming months. The euro’s current strength is a long way from the common currency’s early days following its 1999 launch. With the eurozone overshadowed by what was then robust US economic growth, the euro sunk to a record low of 82.52 US cents in October 2000. (m&c.com)
The ever-weakening dollar and fresh worries about winter fuel supplies have sent US oil prices past $98 a barrel. With global crude prices further lifted by bad weather hitting North Sea oil rigs, US light crude touched as high as $98.62 in early Wednesday trading. London Brent crude also increased, hitting a new high of $95.19. The weaker dollar has been driving up oil prices because some investors have been using the commodity as an alternative to holding dollars. On the other hand, it makes oil relatively cheaper for anybody outside the US. (BBC NEWS)
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