Dollar’s down, oil heads up
Dollar has declined 12 percent since March
WASHINGTON – Hitting a 14-month low against the euro, the sinking dollar renewed concerns Wednesday about higher oil prices and other inflationary threats.
Since early March, when the dollar hit a high for the year against the euro and other major currencies, it has declined about 12 percent against a basket of major currencies.
On Wednesday, the dollar’s value against the euro fell below the psychological barrier of $1.50. In response, oil prices jumped to a new high for the year, settling at $81.37 a barrel.
The euro, the common currency of 16 European nations, peaked Wednesday at its highest level since August 2008. One euro cost $1.5046, up from $1.4928 in late trading Tuesday.
Many analysts saw the euro’s movement above $1.50 as a milestone that could put further pressure on the greenback. The dollar also continued falling against some other currencies, dropping against the British pound, the Canadian dollar and falling to the lowest levels in more than a year against the Swiss franc, the Australian dollar and the New Zealand dollar.
The fall in the dollar is occurring as the federal government’s budget deficit hit $1.42 trillion in the fiscal year ended Sept. 30.
The administration worries that a falling dollar could spook foreign investors, including the Chinese – the largest foreign holder of Treasury securities – into dumping their dollar-denominated assets. That could send the dollar into a tailspin, push interest rates up and send stock prices plunging.
But economists stressed that they see that as a worst-case scenario they don’t expect to occur. So far, they noted, the dollar’s decline has been orderly, returning to levels that preceded the financial crisis.
Mark Zandi, chief economist at Moody’s Economy.com, and other analysts noted that the weaker dollar should be a boon for U.S. manufacturing companies because their products will be cheaper in overseas markets.