Dollar recovers as oil prices retreat

AP News
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Posted: Feb 25, 2011 3:52 PM
Dollar recovers as oil prices retreat

The dollar rose from recent lows against the euro, pound and other currencies Friday as oil prices retreated below $100 a barrel.

The surge in oil prices that has accompanied turmoil in Libya has weighed on the dollar this week. Higher commodity prices hurt the U.S. economy, but the Federal Reserve is still expected to keep rates near zero to support the recovery.

Investors expect other major central banks _ in Europe as well as developing economies _ to raise rates faster because of the pick-up in inflation, and higher rates tend to help support currencies.

The euro fell to $1.3741 late Friday from $1.3807 Thursday, retreating from its highest level in nearly a month, while the British pound dropped back to $1.6098 from $1.6137. The pound reached a one-month high on Wednesday, near $1.63.

The dollar edged down to 81.71 Japanese yen from 81.77 yen, not far off its post-World War II low of 79.75 yen, struck in 1995.

The dollar index, which compares the U.S. currency against six other exchanges, rose 0.30 percent late Friday.

On Friday, crude traded at about $98 a barrel in New York, down from its peak above $103 a barrel Thursday. It had jumped about 20 percent in one week as oil companies shut down production in Libya and investors feared unrest would spread to other major oil-producing countries in the Middle East.

Oil prices retreated Friday after reassurances from Saudi Arabia that it would help make up the shortfall of oil on the market. Prices were also boosted by news that the U.S. economy grew more slowly in the last three months of 2010 than had been previously estimated.

The Commerce Department said Friday that the economy grew at an annual rate of 2.8 percent from October through December, lower than the initial estimate of 3.2 percent growth. The weaker estimate was because of deeper spending cuts by state and local governments that are trying to trim budget deficits.

In other trading Friday, the dollar fell to 97.83 Canadian cents from 98.35 Canadian cents, while the dollar rose from a record low against the Swiss franc of 0.9237 Swiss franc, to 0.9287 Swiss franc on Friday. On Thursday, the dollar was worth 0.9253 Swiss franc.