Make us your home page
Instagram

U.S. dollar's queasy slide pushes up gold price

Investors clamored to buy pretty much anything on Tuesday — as long as it wasn't the U.S. dollar.

A seven-month slide in the value of the dollar gained force as investors migrated to other markets and fretted over a report that crude oil could one day be priced in other currencies, hobbling the dollar's role as a vehicle for global trade.

The dollar's decline propelled gold prices to record highs near $1,040 an ounce and touched off a buying spree for copper, silver, platinum and crude oil — commodities that typically hold their value if the dollar does not.

"Right now, it doesn't give any sign of pulling back significantly," said James Steel, a commodities analyst at HSBC. "There's still a worry about the dollar. There's a latent worry about inflation."

The dollar slipped further against major currencies, continuing a decline that has sent it tumbling 15 percent since early March. The dollar fell to $1.47 against the euro, and the Japanese yen strengthened to 88.83 for every dollar.

Investors who sought the relative safety of the American currency during the financial crisis are now pursuing higher returns in stocks, commodities and foreign currencies, out of concern that demand for American debt is waning and that the dollar could someday lose its status as the world's reserve currency.

Underlying the dollar's weakness is the growing perception that many policymakers around the world — and in Washington — quietly welcome a slow but sustained depreciation of the dollar, especially against the Chinese renminbi and other Asian currencies.

A weaker dollar would make imported goods more expensive in the United States and American exports more competitive, but it could make overseas investors wary of buying the Treasury bonds that the United States needs to sell to finance its budget deficit.

On Tuesday, the Reserve Bank of Australia surprised investors by raising interest rates, making Australia the first big economy to lift rates after the global financial crisis.

Countries around the world — including the United States — trimmed interest rates to record lows as the credit crisis metastasized last year, in an emergency effort to stimulate the markets and keep lending from drying up. Although credit is flowing better now, the Federal Reserve has indicated that interest rates will hover near zero for some time.

"The move was taken as a sign that the global economy is firmly on the road to recovery," said Vassili Serebriakov, a currency strategist at Wells Fargo. "That's lifted risk appetites and assets across the world."

Adding to the turmoil, a report on Tuesday in the Independent, a British newspaper, suggested that China, France, Japan and Russia were in secret talks with Persian Gulf countries to abandon the dollar for international trade in oil and replace it with a basket of currencies plus gold.

The article named no sources and was quickly denied by Muhammad al-Jasser, the governor of the Saudi central bank, and Dmitry Pankin, Russia's deputy finance minister. French officials declined to comment. In China, the government is closed for a weeklong holiday, but well-connected bankers were skeptical.

But the report caught the attention of investors because several economists have been predicting that at some point, the world's oil exporters would start moving toward other currencies to limit exposure to the dollar.

Any shift away from the dollar for oil trading, or for commodities more broadly, would seriously undermine global demand for dollars and strengthen the alternatives to it. This would make it harder for Washington to borrow overseas to finance its budget and trade deficits, and could fuel inflation in the United States.

U.S. dollar's queasy slide pushes up gold price 10/06/09 [Last modified: Tuesday, October 6, 2009 8:09pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, New York Times.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Black entrepreneur says city stiffing him on project after he endorsed Rick Baker

    News

    ST. PETERSBURG — A prominent African-American resident says his endorsement of mayoral candidate Rick Baker has led city officials to freeze him out of a major construction project along the historic "Deuces" stretch of 22nd Street S.

  2. Sen. Nelson urges FEMA to examine high number of denied flood claims

    Banking

    Sen. Bill Nelson urged FEMA on Tuesday to ensure fairness, proper oversight and transparency in processing Hurricane Irma aid following a report by the Palm Beach Post that 90 percent of Irma claims under the National Flood Insurance Program had been denied.

    Sen. Bill Nelson is calling for FEMA to ensure the flood claims process post-Hurricane Irma is fair and ethical following reports that 90 percent of claims under the National Flood Insurance Program were denied. | [Times file photo]
  3. Amazon expands in Tampa with Pop-Up shop in International Plaza

    Retail

    TAMPA — A new retailer known largely for its online presence has popped up at International Plaza and Bay Street.

    Shoppers walk past the new Amazon kiosk Tuesday at the International Plaza in Tampa. The kiosk, which opened last month, offers shoppers an opportunity to touch and play with some of the products that Amazon offers.
[CHRIS URSO   |   Times]

  4. Study: Florida has fourth-most competitive tax code

    Banking

    Florida's tax code is the fourth most competitive in the country, according to a study released Tuesday by nonprofit group Tax Foundation.

    Florida has the fourth-most competitive tax code, a study by the Tax Foundation said. Pictured is  Riley Holmes, III, H&R Block tax specialist, helping a client with their tax return in April. | [SCOTT KEELER, Times]
  5. Trigaux: On new Forbes 400 list of U.S. billionaires, 35 now call Florida their home

    Personal Finance

    The latest Forbes 400 richest people in America was unveiled Tuesday, with 35 billionaires on that list calling Florida home. That's actually down from 40 Florida billionaires listed last year when a full 10 percent listed declared they were Floridians by residence.

    Edward DeBartolo, Jr., shopping center developer and  former San Francisco 49ers Owner, posed with his bronze bust last year during the NFL Hall of Fame Enshrinement Ceremony in Canton, Ohio. DeBartolo remains the wealthiest person in Tampa Bay according to the Forbes 400 list released Tuesday. 
[Photo by Joe Robbins/Getty Images]