Dollar gains

Global markets slide as recession fears dominate. Currency traders shy away from risk amid the turmoil.

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By Ben Rooney, staff writer

What should be at the top of the next president's economic agenda?
  • Solving the credit crunch
  • Creating new jobs
  • Reducing the deficit
  • Halting the housing meltdown
  • Cutting taxes

NEW YORK ( -- The U.S. dollar rose against the euro and the pound Wednesday, as wary investors favored the stable greenback over higher-yielding currencies.

At 4 p.m. ET, the 15-nation euro traded at $1.3491, down from $1.3653 late Tuesday in New York. And the British pound fell to $1.7312, from $1.7421.

"The market is very tentative," said Gareth Sylvester, senior currency strategist at U.K.-based foreign exchange broker HiFX. It will take a prolonged period of calmness before currency traders will expose themselves to risk, Sylvester said.

Until then, he expects to see "quiet price action."

World stock markets rebounded Monday after a devastating week of losses. But the positive sentiment was tempered Tuesday, and concerns about a global recession weighed on markets Wednesday.

In Europe, stocks fell about 7% in Frankfurt, Paris and London. And the U.S. stock market slumped nearly 8% about two hours into Wednesday's session.

Traditionally lower-yielding currencies like the U.S. dollar and the Japanese yen are seen by many traders as a relatively safe haven when markets are volatile.

As a result, those currencies often gain ground against higher-yielding currencies like the euro and pound, which are considered more risky, when stock prices fall.

The greenback softened against the yen to buy ¥100.26, down from ¥102.00.

The retreat on Wall Street comes amid dour economic data and bleak comments from a Federal Reserve official.

Government figures released Wednesday showed much weaker-than-expected retail sales for September. It was the biggest drop in the overall sales in three years. Excluding the impact of extremely weak auto sales in the period, the decline was much sharper than forecasts.

Separately, the Producer Price Index, the reading on inflation on the wholesale level, fell as expected due to lower energy prices. But the so-called core PPI, which excludes volatile oil and energy prices, rose more than expected.

Meanwhile, San Francisco Federal Reserve President Janet Yellen acknowledged in a speech late Tuesday that "the U.S. economy appears to be in a recession."

Fed Chairman Ben Bernanke warned Wednesday that the an economic recovery will take time - even if the credit markets return to normal. To top of page

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