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The Dollar advances as global stocks fall and investors look for safety

Fri, Nov 20 2009, 08:20 GMT
by Benny Menashe

Finotec Group Inc.

The greenback climbed against the euro as stock markets fell, discouraging demand for higher yielding assets. “The market is very nervous, and there are not a lot of risk takers right now,” said Sebastien Galy, a strategist at BNP Paribas SA in New York. “There’s one big trade, the dollar short trade, and people are feeling increasingly nervous about it.” A short is a bet for a currency to fall. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, advanced 0.2 percent to 75.327. It touched 74.678, the lowest level since August 2008, on speculation the Federal Reserve will trail other central banks in increasing borrowing costs. The EUR/USD is currently trading at $1.4920 as of 21:16pm, GMT with a bearish trend.

Sterling slipped on Thursday as UK borrowing data underlined Britain's deteriorating finances, while a selloff in high-risk currencies also kept the pound under pressure. Also hitting sterling was data showing Britain's public finances deteriorated at a much sharper pace than expected last month, taking public borrowing as a share of GDP to its highest on record. That data took the shine off a rise in retail sales. Ratings agencies have said the UK may face a possible cut in its sovereign rating if its fiscal position worsens. This would likely tarnish the appeal of UK government debt and prompt investors to pull funds out of the country, hurting sterling. Analysts said the data highlighted the need for the UK to rein in borrowing or face the possibility of a ratings downgrade. Such measures, coupled with ongoing low interest rates would keep sterling weak in the mid to longer term. The GBP/USD is currently trading at $1.6660 as of 21:40pm, GMT with a bearish trend.

U.K. house prices will probably fall next year, and it may take until 2014 to return to the levels at the 2007 peak of the country’s biggest housing boom, according to a Bloomberg survey. For all of 2009, the average home will probably increase about 5 percent in value, to almost 161,000 pounds ($270,000), said Martin Gahbauer, chief economist of Nationwide Building Society, the U.K.’s largest customer-owned mortgage lender. Martin Ellis, chief economist of Halifax, Britain’s biggest provider of home loans, expects prices to be little changed. U.K. residential real estate had almost tripled in value during the decade before the credit crunch. The gains encouraged more Britons to pour borrowed money into homes and more “buy- to-let” investors to acquire property for rental income.

Today's Economic Events

Published on  Fri, Nov 20 2009, 08:20 GMT