US dollar soars as oil plunges
The US dollar jumped to a six-month high against the euro yesterday and a 21-month high against sterling, boosted by a fall in oil prices and speculation that the slowdown affecting the American economy was spreading worldwide.
The greenback, rose to a peak of $1.51 against the euro and $1.93 against the pound as crude oil prices fell to a 14-week low of $112.72 a barrel yesterday.
Mounting signs of economic difficulties in Europe, Asia and Australia have diminished prospects of higher interest rates outside the US, bolstering demand for the dollar.
“The US economy led the way into this downturn, starting well over a year ago, and now the ripple effects are starting to hit these other economies,” said Brian Dolan, chief currency strategist at Forex.com in New Jersey.
“If you take it back a month ago, the Bank of England was supposed to tighten rates, the European Central Bank was going to tighten rates,” Dolan said. “One month later, we’re looking at a 180-degree view change and that’s why you’re seeing this very sudden unravelling of all these trades.”
Declining oil prices helped ease worries about the impact of higher energy costs on the US economy Analysts expect the dollar to continue to strengthen if oil prices remain below $120 a barrel.