Dollar decline pauses; euro stays just under $1.50

AP News
|
Posted: Nov 10, 2009 4:45 PM

The dollar rout paused Tuesday, with the euro hovering just short of $1.50 as stocks zigzagged.

Over the weekend, the world's leading economies agreed to keep stimulus measures in place, while the Group of 20 finance ministers failed to make a statement on the U.S. currency.

That drove the value of the dollar against a basket of six major currencies to its lowest level since August 2008 on Monday.

On Tuesday, the 16-nation euro dipped to $1.4978 from $1.4999 late Monday after rising above $1.50 in European trading. The British pound slid to $1.6737 from $1.6752. Meanwhile, the dollar fell to 89.77 Japanese yen from 89.99 yen.

Investors around the world are seeing the dollar as weaker than other currencies because of U.S. interest rates near zero and huge budget deficits. They're using it for what's known as "carry trade." That means traders borrow cheaper dollars to make bets on riskier assets such as emerging-market currencies, oil or equities.

In a note prepared for the meeting over the weekend, the International Monetary Fund said the dollar was "now serving as the funding currency for carry trades," and that these trades may be "contributing to upward pressure on the euro."

On Tuesday, traders took a break from selling the dollar. However, analysts say the "carry trade" will continue, weighing on the dollar, until the Fed signals it will start raising interest rates from their current range near zero in the near- or medium-term future.

Stocks ended mixed, taking their cue from the slight rebound in the dollar. The Dow Jones industrial average rose 20 points, while the Standard & Poor's 500 fell less than 1 and the Nasdaq composite index is down 3.

In other late New York trading, the dollar inched up to 1.0081 Swiss francs from 1.0079 francs late Monday, but slid to 1.0496 Canadian dollars from 1.0544.