Dollar rises as global stock markets plunge

AP News
Posted: Sep 22, 2011 1:34 PM
Dollar rises as global stock markets plunge

The dollar rose strongly against the euro and other major currencies Thursday as a selling spree in global stock markets increased demand for lower-risk investments.

Asian and European markets plunged Thursday as traders absorbed the Federal Reserve's bleak assessment of the U.S. economy. The Fed had said that the U.S. economy is vulnerable to major risks, including from unstable financial markets.

Bad economic news from Asia and Europe also pushed people to sell riskier investments that typically gain value during periods of growth. HSBC's index of Chinese manufacturing showed that factories there have slowed in September.

Markets in China and India closed down more than 4 percent as traders questioned whether emerging economies will remain strong if developed nations enter recession. Major indexes in Germany and France lost 5 percent on spreading fears about an economic slowdown caused by the sovereign debt crisis there.

U.S. shares followed, with indexes sliding more than 3 percent by midmorning.

Money flooded into currencies that are seen as safe, stable bets _ the dollar, Japanese yen and Swiss franc.

At 1:10 p.m. Eastern time, the euro was worth $1.3481, down from $1.3667 late Wednesday. The British pound fell to $1.5368 from $1.5578. The dollar rose to 0.9073 Swiss franc from 0.8954 franc. But it slipped to 76.37 yen from 76.62 yen.

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Traders dumped commodities such as oil and metals, fearing demand will decrease as the global economy slows. Oil fell more than 6 percent, silver lost nearly 9 percent.

That hurt currencies of nations that produce those commodities. The dollar rose to 1.0286 Canadian dollar from 1.0035 on Wednesday. It rose against the Norwegian krone and Swedish krona as well.

The Australian dollar was worth 97.76 cents, down from $1.0125. The New Zealand dollar fell to 78.06 cents from 80.54.