Dollar climbs as stocks retreat

Investors favor safe-haven currencies as stock prices decline.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Ben Rooney, CNNMoney.com staff writer

What do you think of Geithner's plan to enlist private firms in the bank bailout?
  • It's good - we need their money
  • It's bad - it won't work
v2-cnnmoney-chart4.jpg.mkw.gif
Click the chart for current FX rates.

NEW YORK (CNNMoney.com) -- The dollar rose against the euro and the yen on Tuesday, but remained weak against the pound as stock prices fell and investors' appetite for risk waned.

"The retracement in the U.S. equity market is dragging higher-yielding currencies lower, except the British pound, and driving the U.S. dollar higher," said Kathy Lien, director of currency research, at Global Forex Trading.

Stocks slumped Tuesday after a massive rally in the previous session. That helped boost the traditionally low-yielding dollar, which often gains ground when stocks fall, as investors shied away from more risky currencies such as the euro.

The retreat in the stock market comes one day after the Treasury Department unveiled a new "Public-Private Investment Program" aimed at purchasing up to $1 trillion in bad assets from banks to cleanse their balance sheets and get them lending again.

But the traditionally high-yielding pound advanced, despite investors' diminished risk appetite, after a report from the British government showed U.K. inflation unexpectedly rose to 3.2% in February.

The data raised bets that the Bank of England will be forced to hold off on future interest rate cuts, which can erode the yield base of a currency, Lien said.

The dollar fell 0.75% against the pound to $1.4677 and gained 0.5% versus the euro to trade at $1.3559. The dollar advanced more than 1% against the yen to buy ¥98.07.

Meanwhile, the currency market is also digesting a call from China's central bank chief to overhaul the global monetary system by expanding the use of an alternate reserve currency to challenge the U.S. dollar.

"Special consideration should be given to giving the SDR a greater role," People's Bank of China governor Zhou Xiaochuan said on Monday. The International Monetary Fund's Special Drawing Right (SDR) is an accounting unit composed of a basket of currencies. It currently includes the euro, Japanese yen, pound sterling and U.S. dollar.

Increasing the role of IMF's SDR would help reduce dependence on any one country's currency and mitigate the impact of a single country's monetary and fiscal policies, Zhou said.

While the statement reflects China's uneasiness with the long-term prospects of the dollar, it was not a major factor in the currency market on Tuesday, Lien said.

"I don't think market is reacting to [Zhou's comments] because the dollar is rising, not weakening," she said.  To top of page

Track 17 major currencies

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Some Converse copycats cost big bucks A few bargain brands got swept up in Chuck Taylor's net, but others cost a pretty penny. More
Urban infrastructure gets a second life Railroad beds become parks, power plants become aquariums and slaughterhouses are now art centers as an industrial past turns people-centric. More
Boomtown moms From working mothers raising their kids in RVs to stay-at-home moms who spend their days organizing events for the Oil Wives club, meet the moms of North Dakota's oil boom. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.