Date: Wednesday 30 Jun 2010
Risk averse investors took sanctuary in the dollar Tuesday as doubts grew about the pace of economic growth in China.The Conference Board’s China leading economic index rose just 0.3% in April, a sharp revision down from its preliminary estimate of a 1.7% rise, prompting concerns that China will not play as full a part in driving global growth as previously assumed.
That provoked demand for the greenback, even though US consumer confidence data suggested the US economy is not in such great shape itself, with the spectre of unemployment prompting many shoppers to keep their hands in their pockets.
The US consumer confidence index slumped from 62.7 to 52.9, compared with expectations of a small decline.
The dollar index, which measures the currency’s value against a basket of six currencies, climbed to 86.053 towards the end of the session from 85.620 a day earlier.
The greenback fell to its lowest level since December 2009 against the Japanese yen, however, with the Japanese currency proving an even bigger draw for safety conscious investors. The dollar bought 88.50 yen at the end of the session, down from 89.39 yen the day before.
The euro also fell against the yen, sliding to 107.99, its lowest level in eight and a half years, while against the dollar it dipped to just over $1.22 from $1.2292 on Monday afternoon.
Against the Swiss franc the single currency fell to an all time low.
The common currency was weighed down once more by revived concerns about the health of European banks ahead of the expiration this week of the European Central Bank’s (ECB) special one-year funding package. In total, European banks have to pay the ECB back more than half a trillion dollars this week.
As a result of the euro’s weakness sterling hit a 19-month high against the common currency.
In London, the value of the euro slumped to 80.77p at one stage, its lowest level since November 2008.
Sentiment towards the pound was also boosted by a well received launch of a new gilt, dated 2040 with a coupon of 4.25%.Sterling did less well against the US dollar, easing to around $1.5070, having hit a seven-week zenith of $1.5130 on Monday.
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