Dollar sinks to 8-month low vs yen as growth slows
The dollar had often been used as a safe haven throughout the recession and earlier this year as a debt crisis struck Europe. But worsening economic data in the U.S. is driving investors to zero in on weakening growth at home as unemployment remains high, catapulting the yen to the safe haven asset of choice among currencies.
The Associated Press
7/30/2010
NEW YORK — Weakening U.S. economic growth and worried comments from Federal Reserve officials drove the dollar to an 8-month low Friday against the Japanese yen.
In morning trading in New York, the dollar dropped to 86.56 yen from 86.98 yen late Thursday, sinking as low as 85.95 yen just after the government said growth in the U.S. gross domestic product fell to its weakest pace in nearly a year.
That’s the yen’s highest level against the dollar since November 2009.
The dollar had often been used as a safe haven throughout the recession and earlier this year as a debt crisis struck Europe. But worsening economic data in the U.S. is driving investors to zero in on weakening growth at home as unemployment remains high, catapulting the yen to the safe haven asset of choice among currencies.
Credit Suisse analysts see the Federal Reserve keeping U.S. interest rates at record lows near zero through 2011 as the recovery falters. Low interest rates drag on the value of investments bought in dollars, sapping demand for the U.S. currency.
The appetite for dollars was also weak because of statements from a Fed official Thursday that hinted at worry within the central bank about deflation, said Joseph Trevisani, chief market analyst of FXSolutions.
James Bullard, president of the Federal Reserve Bank of St. Louis, on Thursday proposed that the Federal Reserve restart its program of buying government debt if U.S. prices, home values and wages start to drop.
The Fed bought government debt during the financial crisis to get more money circulating in the economy as credit froze.
Other trading was mixed Friday, with the dollar recovering from some early-morning drops right after the Department of Commerce said economic GDP growth had slowed to 2.4 percent in the second quarter.
The euro fell to $1.3022 from $1.3079 late Thursday, while the British pound rose to $1.5639 from $1.5620. The dollar rose to 1.0455 Swiss francs from 1.0425 francs, but fell to 1.0298 Canadian dollars from 1.0359 Canadian dollars.
The dollar was weaker versus the Australian dollar and currencies in Latin America and Asia.
Kevin Jones of The Trucker staff can be reached for comment at kevinj@thetrucker.com.
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