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Dollar hits new depths, stocks rise

LONDON - The dollar plumbed record lows against major currencies on Friday and briefly got close to $1.50 to the euro as concerns about the US economy rattled investors but Asian and European stocks advanced.

Trading was thinner than usual with Japanese markets closed for a holiday and Wall Street likely to see absentees the day after Thanksgiving.

The dollar’s ongoing decline, however, was in full focus. It fell to an all time low against a basket of six major currencies , essentially its weakest position globally since the modern currency regime began in the early 1970s.

The euro, meanwhile, hit a record high of $1.4966 and was on a course for the psychologically signficant $1.50 milestone before investors sold it back to below $1.49.

Elsewhere, the dollar hit an all-time low against the Swiss franc and was at 2-1/2 year lows against Japan’s yen.

“They are selling the dollar against safe havens,” said UBS currency strategist Mansoor Mohi-uddin. “(There are) fears about the US economy and worries that US interest rate cuts will be front loaded while rate cuts in the rest of the world will take longer to materialise.”

Lower US interest rates make the dollar less attracive to investors.

One key to the future direction of the euro and dollar will be the state of the euro zone economy. There were mixed signals on Friday with growth in the euro zone’s dominant services sector falling more than expected as new orders slipped, but the manufacturing industry staged an unanticipated rebound.

Bank of Spain Governor and European Central Bank council member Miguel Angel Fernandez Ordonez also said that while there were some medium-term inflation risks in the euro zone, world financial turmoil threatened a stronger-than-expected slowdown.

Both the data and Ordonez’s comments pulled the euro back.

Stocks, bonds

European shares rose, helped by a fresh wave of merger talk in the financial and mining sectors.

The FTSEurofirst 300 index of top European shares was up 0.7 percent, having rallied the same on Thursday.

The strong euro, however, was lurking in the background.

“Obviously with the euro at $1.49 plus ... people may come back to which sectors are exposed and that is bad news for autos, aerospace and defence,” said Edmund Shing, a strategist at BNP Paribas in Paris.

The chief executive of European planemaker Airbus, Tom Enders, told employees on Thursday that the weak dollar was threatening the survival of the company.

Euro zone government bond prices were flat.

The two-year Schatz yield was at 3.61 percent and the benchmark 10-year Bund yield was at 4.02 percent.