Dollar Rises on Drop in Oil

The dollar rose against the euro for the first time in five days as crude oil prices declined and traders speculated the greenback's biggest drop since January 2001 yesterday was too big to sustain.

Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in Senate testimony today that failure to pass the U.S. financial bailout would threaten the economy. The dollar fell yesterday on speculation the $700 billion rescue will inflate the budget deficit.

The dollar increased 0.4 percent to $1.4713 per euro at 3:17 p.m. in New York, from $1.4774 yesterday, when it dropped 2.1 percent and touched $1.4866, the weakest level since Aug. 22. The dollar traded at 105.77 yen, compared with 105.51. The euro decreased 0.4 percent to 155.24 yen, from 155.91.

The euro fell earlier against the dollar as a report showed Europe's manufacturing and service industries contracted at the fastest pace in almost seven years this month. The U.S. currency has lost almost 6 percent versus the euro since touching a one-year high of $1.3882 on Sept. 11. The dollar reached $1.6038 on July 15, the weakest level since the European currency made its 1999 debut

The brazilian real slumped 2.3 percent to 1.8452 per dollar at 1:49 p.m. New York time, from 1.8032 yesterday. Brazil's real is the biggest decliner among the 16 most-actively traded currencies this month against the dollar, losing 11.5 percent.

Earlier today, the Australian and New Zealand dollars reached their highest in three weeks as prices rose for commodities the nations export and the U.S. currency slid on concern the world's biggest economy is headed for a recession. The Australian dollar rose 0.8 percent to 84.14 U.S. cents at 5 p.m. in Sydney, from 83.47 cents late in Asia yesterday. New Zealand's dollar reached 69.53 U.S. cents, the highest since Sept. 2, before trading at 68.85 U.S. cents from 68.74 cents yesterday.

The Chinese yuan rose for a second day after the dollar fell the most in a decade against the currencies of its major trading partners. China has managed the yuan's exchange rate against a basket of currencies, including the euro and the yen, since a peg against the dollar was scrapped in 2005. It has risen 21.5 percent against the dollar since then.

India's rupee fell the most in a week as an advance in oil prices over the past week prompted importers to buy more dollars to fund fuel orders. The rupee slid 0.7 percent to 45.75 a dollar at the 5 p.m. close in Mumbai.

Russia's ruble strengthened against the central bank's dollar-euro basket as falling local interest rates made it easier for companies to borrow money to invest. The ruble rose to as high as 24.9421 to the dollar, its strongest level since Sept. 3, and was little changed at 25.0215 6:49 p.m. in Moscow, from 25.0281 late yesterday. It strengthened to 36.8697 per euro, from 36.9793 yesterday., Bloomberg
9/23/2008 12:59:05 PM