Dollar rallies as stocks slump

Investors seek shelter in U.S. currency as concerns about automakers and banks weigh on the stock market.

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

Click the chart for current FX rates.
10 countries, 10 solutions
A financial crisis has engulfed countries from the best-off to the worst-off around the world. The solutions to the problem are varied.

NEW YORK ( -- The dollar rose against the euro and the pound Monday morning but fell versus the yen as global stocks dropped in response to renewed concerns about the U.S. automotive industry and banks.

The Obama administration said over the weekend that General Motors and Chrysler LLC have not made sufficient progress in their efforts to become economically viable. The government will continue to keep the companies afloat with additional funds but warned that a "structured bankruptcy" is an option still on the table.

Treasury Secretary Tim Geithner said Sunday that the nation's largest banks could still need "large amounts of assistance" before the financial system can be stabilized. He also said the government has about $135 billion left for bank bailouts.

"The blame for today's selloff looks to be a sentiment shift towards the auto sector and financials, which are leading the way lower," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto, in a research report.

On Wall Street, stocks were down about 4% in afternoon trade. Asian and European markets also fell sharply.

The retreat comes after major U.S. stock indexes advanced for three consecutive weeks, gaining more than 20%, amid faint sings of an economic recovery. But the rally faded Friday and selling gained momentum Monday as investors responded to the automaker situation.

The dollar and the yen, which are considered safe havens, often gain ground when stock prices fall as investors shy away from more risky assets.

The dollar was up 0.5% against the euro to $1.3161. It gained 0.45% versus the pound to trade at $1.4195. Against the yen, the dollar sank 0.9% to ¥97.11.

The euro was also under pressure ahead of Thursday's interest rate announcement from the European Central Bank. Most analysts expect the central bank to lower interest rates by half a percentage point to a record low of 1%.

In addition to cutting interest rates, the ECB could announce plans to take unconventional steps such as purchasing corporate bonds, Tihanyi said.

The euro rose to $1.37, near the top of its recent trading range, earlier in March after the Federal Reserve announced plans to purchase longer-term U.S. bonds.

Meanwhile, the leaders of the world's 20 largest economic powers, known as the Group of 20, will gather this week in London to discuss ways to overcome the global financial crisis.

While the market will monitor the meeting for comments on China's recent support for an alternative reserve currency, Tihianyi doesn't expect U.S. officials to make any formal statement on the issue.

China's central bank chief called last week for an expanded role for the International Monetary Fund's Special Drawing Right (SDR) as an alternative to the dollar as the world's primary reserve currency.

The SDR is an international reserve asset based on the value of a basket of currencies, including the euro, Japanese yen, pound sterling and U.S. dollar. It was created to help governments manage exchange rates.

Expanding the role of the SDR would limit the influence of any one country's fiscal and monetary policies on the global economy, said People's Bank of China governor Zhou Xiaochuan. To top of page

Track 17 major currencies

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
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. 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

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.