Committed to PEOPLE'S RIGHT TO KNOW
Vol. 5 Num 994 Sun. March 18, 2007  
   
Business


Dollar falls as economic worries grow


The US dollar fell sharply Friday after an inflation snapshot triggered renewed concerns about the US economy, traders said.

The single European currency was changing hands at 1.3307 dollars at 2000 GMT compared with 1.3236 late Thursday in New York. The euro at one point climbed to 1.3340 dollars, its highest point against the dollar since December 8.

The dollar meanwhile dropped to 116.72 yen compared with 117.48 on Thursday.

"The currency market was laden with a number of concerns for the US economy and its currency. Over the past days, weak retail sales, inflation and factory activity gauges have left the greenback little fuel for big moves," said John Kicklighter, a currency analyst at Forex Capital Markets.

Economists said the latest US inflation reading would likely cement a decision next week by the Fed to keep US interest rates on hold at 5.25 percent. The Fed, which has cited inflation as one of its key concerns, meets Tuesday and Wednesday in Washington to mull US rates.

The Labor Department said earlier Friday that US consumer prices rose 0.4 percent in February, stronger than the 0.3 percent rise widely expected by Wall Street.

The core inflation reading, which strips out volatile food and energy costs, rose 0.2 percent and was in line with forecasts.

The rise in inflation comes amid a wider slowing of the world's largest economy, although a separate economic indicator Friday was more upbeat.

A Fed report showed US industrial production rebounded by a much bigger-than-anticipated 1.0 percent in February after falling in the prior month.

Most economists had been expecting the central bank's monthly snapshot of the nation's industrial sector, measuring the output of US factories, mines and utilities, to show a rise of just 0.3 percent.

The jump in industrial output across the United States marked the strongest gain since November 2005, but was largely attributed to a ratcheting up of gas and electricity output from the nation's utilities amid cold winter temperatures.

"Dollar weakness since the big equity market sell-off began at the end of February has largely been confined to lower-yielding currencies as carry trades have come under pressure, but over the past two days the dollar has come under broader pressure," said Daniel Katzive at UBS.

Investors are worried about an overall US economic slowdown, concerns that have been driven by the difficulties facing sub-prime housing lenders, who lend money to borrowers with patchy credit histories.

In late New York trade, the dollar stood at 1.2071 Swiss francs from 1.2171 Thursday.

The pound was being traded at 1.9414 dollars after 1.9360.