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Dollar slips as oil rises, financials in turmoil

Dollar slips as oil rises, financials in turmoil

The dollar fell Thursday as oil prices surged and investors continued to fret over financial company earnings and a possible government bailout of mortgage finance companies Freddie Mac and Fannie Mae.
The 15-nation euro rose to $1.4877 in late New York trading from $1.4741 Wednesday. The British pound climbed to $1.8751 from $1.8615, while the dollar fell to 108.65 Japanese yen from 109.79 yen.
Light, sweet crude for October delivery jumped $5.62 to settle at $121.18 a barrel on the New York Mercantile Exchange after earlier rising as high as $122.04, crude's highest trading level since Aug. 4. Crude prices have settled higher for three straight sessions.
Investors often use oil as a hedge against a falling dollar, even as rising oil prices fuel inflation. The prices of crude futures and the dollar have tended to move in opposite directions.
Banks and brokerages are under pressure as analysts see further mortgage-related write-downs ahead, and there has been speculation that Lehman Brothers Holdings Inc. may have to sell off assets at bargain-basement prices in order to raise needed capital.
Shares of government-sponsored mortgage finance companies Fannie Mae and Freddie Mac tumbled Thursday. They both have lost more than half their value since Monday because shareholders are afraid the government may intervene if the companies are unable to continue operating.
"The dollar had been rallying very sharply for a little bit more than a month _ a little bit overbought," said David Solin of Foreign Exchange Analytics in Essex, Connecticut. Now "ongoing concerns in the U.S. on the financials, that's taken its toll on stocks. On top of that, oil ... you have all these negative factors kicking in."
Also on Thursday, the Conference Board, a private business group, said its index of future economic activity fell 0.7 percent in July, more than expected. It was the index's sharpest drop this year.
Meanwhile, the Labor Department said that the number of workers filing for unemployment benefits dropped 13,000 to 432,000, more than expected. But the four-week moving average, which grew to 445,750, is at its highest level in almost seven years.
"Profit-taking off recent gains and the fact commodity prices are edging higher once more is ensuring that the dollar retreats further from the highs it saw earlier in the week," said James Hughes, a currency analyst with CMC Markets.
In other trading, the dollar slid to 1.0456 Canadian dollars from 1.0626 Canadian dollars, and fell to 1.0881 Swiss francs from 1.0995 francs.


Updated : 2020-12-03 12:35 GMT+08:00