Sun, Nov 25, 2007 - Page 10 News List

Dollar still weighed down amid fears about US economy

AFP , NEW YORK, BLOOMBERG AND CNA

The dollar remained weighed down on Friday by concerns that the world's largest economy could lose momentum in future months leading to fresh interest rate cuts.

The lingering worries propelled the euro to a new record high against the US currency of US$1.4967 in Asian trading before the euro retreated in later European and US trading.

The euro stood at US$1.4833 in mid-afternoon trading in New York, marginally lower from US$1.4850 late on Wednesday. The US market was closed on Thursday due to the Thanksgiving Day holiday.

The US currency has fallen sharply this year against other world currencies amid a persistent housing slump and an associated credit squeeze which is buffeting economic growth.

The Federal Reserve's move to cut US interest rates in September and last month also pressured the dollar as speculators generally prefer to invest in countries where interest rates are expected to move higher.

The dollar's demise has triggered concern in European capitals where officials are concerned that the euro's sharp rise against the dollar could dent exports.

In Asia South Korea's won had its biggest weekly decline in three months as overseas investors cut holdings of the nation's stocks on concern credit-market losses will slow global economic growth.

The won touched its lowest point in more than two months on Nov. 22 as stock exchange data showed fund managers abroad sold more of the nation's shares than they bought for 12 straight days, the longest stretch since August. The Kospi stock index completed it biggest weekly slid since the five days to Aug. 17.

The won fell 1.4 percent last week to 930.60 per dollar, according to Seoul Money Brokerage Services Ltd. It was the second straight weekly loss. The currency may weaken to around 942 this week, Yamamoto said.

South Korea's currency fell for a third week against the yen, declining 3.4 percent over the five days to 8.6198, according to data compiled by Bloomberg.

The Taiwan dollar gained ground on the US dollar on the Taipei Foreign Exchange on Friday, gaining NT0.016 to close at NT$32.324. A total of US$964 million changed hands during the day's trading. The US currency opened at NT32.340 and fluctuated between NT$32.321 and NT$32.378.

China's yuan rose beyond 7.4 to the dollar for the first time since a link to the US currency was scrapped in 2005 before a European delegation arrives in Beijing this week to press for faster appreciation.

The People's Bank of China signaled it wanted the yuan to gain as it set the reference rate for the day's trading on Friday at 7.3992 from the close of 7.4145 on Thursday. Xie Fuzhan, a member of the central bank's monetary policy committee, said this week that China's currency is undervalued and increased flexibility is "essential" to make economic growth more stable.

The currency advanced 0.11 percent, the biggest gain in two weeks, to 7.4060 against the dollar in Shanghai from 7.4257 a week ago, according to the China Foreign Exchange Trade System. It reached 7.3912 on Friday, the highest since the end of the dollar link.

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