Dollar is brighter after a long decline
Stronger values make crude oil, imports cheaper
By EMILY FLYNN VENCAT Associated Press
Aug. 16, 2008, 2:00AM
LONDON — The buck may be turning into a bull. (yep, bull indeed!).
The U.S. dollar extended its recent rally against major currencies Friday as commodities fell and European and Japanese economies faltered. After sliding for years, the dollar may finally be on the way back up, some analysts argue.
The currency rose against the pound for the 11th straight day Friday, to $1.85 — its longest winning streak in 37 years. As recently as July, one pound would buy two dollars. At the same time, the dollar climbed to its strongest level in almost six months against the euro, which fell to $1.47, and to near a seven-month high versus the yen.
So far, the trend has helped push oil prices lower. Long term, a stronger dollar has a range of consequences. It makes imports cheaper for Americans, and makes it more expensive for foreign companies to buy U.S. assets such as Anheuser-Busch Cos., which is being sold to Belgian-based brewer InBev for $52 billion.
A stronger dollar would probably come as a relief to many European businesses, too, since it makes their exports to the key U.S. market more price-competitive.
The dollar reached an all-time low on July 15 of $1.60 to the euro, down from a peak of 82 cents to the euro in 2000. The dollar's decline is blamed on the large U.S. trade and budget deficits, investment flows out of the United States, and lately by interest rate cuts by the Federal Reserve.
Some think it's only up from here. The dollar is now benefiting from the widespread sense that prices for commodities such as oil and gold are on the brink of a massive fall, as traders gamble that a slowing global economy could lead to diminished demand.
"There's a fear that the whole commodity boom is going to end, that the bubble is going to burst," said James Hughes, market analyst at financial traders CMC Markets. "That's giving the dollar a bit of cheer."...cont'd
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