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Dollar firms against euro, pound; drops against yen

The US dollar rose against the euro and the pound, but fell against the yen and Swiss franc on Friday amid news Washington propoeses an economic stimulus package to avert recession.

In late New York trading, the euro fell to US$1.4622 from US$1.4673 on Thursday. The British pound, meanwhile, slipped to US$1.9681 from US$1.9713, dragged down by disappointing retail sales data in the UK.

The dollar's rise against both, however, is not a sign of traders' faith in the US currency, said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut.

"I wouldn't be betting on the dollar putting in a bottom and strengthening in the midst of an elevated risk of a US recession," Gilmore said. "The stock market is melting down."

The Dow Jones Industrial Average has fallen more than 400 points in the past two days, even as politicians and government officials announced the economic stimulus plan.

The US dollar fell to ¥106.67 from ¥107.00 and 1.0990 Swiss francs from SF1.1003.

The Swiss franc and the yen, both "carry-trade" currencies, have tended to rise when stocks fall and decline when stocks jump.

Carry trades involve borrowing currencies from countries with low interest rates, such as Japan and Switzerland, and investing the funds in higher-yielding assets elsewhere. Carry-trade beneficiaries are usually the euro and currencies of countries with high interest rates, such as the New Zealand dollar.

The US dollar sometimes receives a boost on days when Wall Street tumbles, as nervous investors sell off the euro.

In other New York trading, the dollar fell to C$1.0282 from C$1.0299.
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