Dollar reaches highest level since February
23/Sep/2011 • Currency Updates•
GLOBAL stock markets, oil prices and the euro plunged last night as fears of a global recession spread. The fall came after data showed growth levels in Germany and France grinding to a halt this month, and China slipping further in an economic slowdown.
Bad news out of the US over the course of yesterday afternoon kicked the third leg out from under the markets and plunged stock markets into the red. It came after new Purchasing Managers Index (PMI) data showed economic activity in the Eurozone as a whole shrank this month for first time in more than two years.
Sterling hit a one-year low against the dollar and a record low versus the yen on Thursday after the Federal Reserve warned of significant weakness in the U.S. economy, prompting investors to slash exposure to riskier currencies and assets.
The outlook for sterling remained bleak after Wednesday’s Bank of England minutes flagged policymakers’ increased readiness to ease monetary policy further. The sharp drop in cable meant some investors would be looking to buy at these levels, although the preference was to sell any sterling rallies.
BoE dove Adam Posen remained the only policymaker at the bank’s September meeting to vote for an extra 50 billion pounds in asset purchases but Wednesday’s minutes showed most members felt the case had strengthened for more asset purchases immediately.
Worried investors have abandoned the euro in favour of the dollar, causing the greenback to hit its highest level against the European currency since February.
With no hint of the recent economic turmoil coming to an end, the dollar also reached a one-year high against the pound as investors sought safety over high returns. The world-wide sales of equities fuelled the dollar’s growth, with the global sell-off more severe than many analysts had predicted.
Market awaits G20 meeting this weekend with the main focus on growth and the Euro Zone debt crisis.