US Dollar Plunged to a Record Low Against the Euro While Oil and Gold Hit New Records.
The dollar slumped to a fresh record low point against the euro on Friday and a near three-year trough versus the yen on increasing worries about the weakness of the US economy, traders said.
In early European trading, the euro reached a historic peak of 1.5239 dollars. It later stood at 1.5205 dollars compared with 1.5197 in New York late on Thursday. The dollar on Friday dropped to 104.23 yen -- the lowest level since May 2005. It later stood at 104.39 yen compared with 105.30 late Thursday.
The weakness of the dollar also benefited commodities, with oil and gold prices striking record highs, dealers said. New York crude reached a record 103.05 dollars per barrel and gold hit a best-ever 976.32 dollars per ounce.
A weak US currency boosts demand for dollar-denominated raw materials because it makes them cheaper for buyers using stronger currencies. However the increased demand eventually leads to higher prices.
US central bank chief Ben Bernanke had warned on Thursday that the American economy faced more complex problems than before the last recession. "Following Bernanke's testimony yesterday, which implied deeper and more sustained real rate cuts may be required, concerns have mounted over US growth and there has been a shift back towards the safer haven currencies," said ABN Amro analyst Melinda Smith.
Federal Reserve chairman Bernanke said the US economy faced a different and more complex set of issues than before the recession of 2001. "We are facing a situation where we have simultaneously a slowdown in the economy, stress in the financial markets and inflation pressure coming from these commodity prices abroad," Bernanke told Congress.
"Each of those things represents a challenge. We have to make our policy in trying to balance these different risks in a way that will get the best possible outcome for the American economy," he added.
Financial markets have been turbulent since last year over rising mortgage defaults by Americans with poor credit histories, raising concerns over a credit crunch as financial institutions cover their losses.
But Bernanke's remarks surprised some dealers after a month dominated by positive signs. The market had been digesting hefty rate cuts by the Fed and news that credit ratings for major bond insurers would remain steady. "The market's insecurity over the US economy strengthened" after Bernanke's comments, said Masaki Fukui, a senior market economist at Mizuho Corporate Bank.
The dollar slumped to a fresh record low point against the euro on Friday and a near three-year trough versus the yen on increasing worries about the weakness of the US economy, traders said.
In early European trading, the euro reached a historic peak of 1.5239 dollars. It later stood at 1.5205 dollars compared with 1.5197 in New York late on Thursday. The dollar on Friday dropped to 104.23 yen -- the lowest level since May 2005. It later stood at 104.39 yen compared with 105.30 late Thursday.
The weakness of the dollar also benefited commodities, with oil and gold prices striking record highs, dealers said. New York crude reached a record 103.05 dollars per barrel and gold hit a best-ever 976.32 dollars per ounce.
A weak US currency boosts demand for dollar-denominated raw materials because it makes them cheaper for buyers using stronger currencies. However the increased demand eventually leads to higher prices.
US central bank chief Ben Bernanke had warned on Thursday that the American economy faced more complex problems than before the last recession. "Following Bernanke's testimony yesterday, which implied deeper and more sustained real rate cuts may be required, concerns have mounted over US growth and there has been a shift back towards the safer haven currencies," said ABN Amro analyst Melinda Smith.
Federal Reserve chairman Bernanke said the US economy faced a different and more complex set of issues than before the recession of 2001. "We are facing a situation where we have simultaneously a slowdown in the economy, stress in the financial markets and inflation pressure coming from these commodity prices abroad," Bernanke told Congress.
"Each of those things represents a challenge. We have to make our policy in trying to balance these different risks in a way that will get the best possible outcome for the American economy," he added.
Financial markets have been turbulent since last year over rising mortgage defaults by Americans with poor credit histories, raising concerns over a credit crunch as financial institutions cover their losses.
But Bernanke's remarks surprised some dealers after a month dominated by positive signs. The market had been digesting hefty rate cuts by the Fed and news that credit ratings for major bond insurers would remain steady. "The market's insecurity over the US economy strengthened" after Bernanke's comments, said Masaki Fukui, a senior market economist at Mizuho Corporate Bank.
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