Dollar once again declining after brief rally

AP News
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Posted: May 02, 2011 4:12 PM
Dollar once again declining after brief rally

The dollar retreated again Monday after a brief rally following news of the death of al-Qaida leader Osama bin Laden.

The dollar has fallen against a basket of six major currencies -- the euro, Japanese yen, British pound, Canadian dollar, Swiss franc and Swedish krona -- for the past eight trading days. That measure struck its lowest point since July 2008 on Monday, at 72.72. It hit bottom in April 2008 at 71.33. Its highest point since the euro's creation was 120.92 in July 2001.

The dollar has been shrinking in value because investors expect that the Federal Reserve will keep interest rates low and continue other stimulus efforts, while central banks overseas are raising interest rates. Higher rates tend to make currencies more attractive to investors seeking higher yields.

A report showing a slowdown in economic growth in the U.S. last week also contributed to investors' concerns, reflected in the dollar's decline. The government had said Thursday that economic growth in the first three months of the year slowed to an annual pace of 1.8 percent from 3.1 percent at the end of 2010.

The euro fell to $1.4846 late Monday from $1.4839 late Friday. It traded above $1.49 earlier in the day for the first time since December 2009.

On Monday, the Institute for Supply Management said that U.S. manufacturing activity increased in April, though at a slightly slower pace than the previous month. Also on Monday, the Commerce Department reported that builders started work on more projects, lifting construction spending in March after three straight monthly declines.

In other currency trading Monday, the British pound fell to $1.6683 late Monday from $1.6711 Friday, while the dollar traded at 81.30 yen, up from 81.10 yen.

The Australian dollar struck its latest high against the U.S. currency, while the Canadian currency traded just shy of its strongest level since November 2007. The Swiss franc was nearly unchanged against the dollar.