Dollar Gains Against Euro

The dollar rose against the euro for a fourth day as Federal Reserve Chairman Ben S. Bernanke endorsed additional fiscal stimulus.

The greenback advanced against the South African rand and the Swiss franc on speculation U.S. government and central-bank efforts will help the world's largest economy recover from a recession before the rest of the world. The South Korean won strengthened versus the dollar as the government guaranteed $100 billion of lenders' foreign-currency debt.

The dollar gained 0.7 percent to $1.3321 per euro at 2:43 p.m. in New York, from $1.3410 on Oct. 17. It touched $1.3259 on Oct. 10, the strongest since March 2007. The dollar traded at 101.73 yen, compared with 101.69. The dollar gained 2 percent to 10.2074 versus the rand and 1.4 percent to 1.1515 francs. The yen rose 0.5 percent to 135.30 per euro, from 136.21.

India's rupee fell as much as 0.3 percent to 49.0150 per dollar after the central bank unexpectedly lowered its key repurchase rate by 1 percentage point to 8 percent. It was the Reserve Bank of India's first rate cut since 2004.

Developing-nation currencies tumbled after Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15, deepening a freeze in credit markets and prompting investors to turn to the safest, dollar-denominated securities. Zurich-based UBS AG predicts the rupee will weaken 2.2 percent to a record low of 50 per dollar by March, adding to a 19 percent drop this year, while the won will depreciate 6 percent to 1,400, extending a 29 percent slump.

The dollar has gained 17 percent since touching the record low of $1.6038 per euro on July 15 on speculation the greenback will benefit as the European economy slows.

The dollar swung between a gain and a loss versus the yen today, indicating investors aren't committed to resuming carry trades, in which they buy high-yielding assets funded in currencies with lower interest rates. The yen has advanced 4.4 percent versus the dollar this month as carry trades unwound.

Canada's currency weakened for a second day after reports showed wholesale sales in August fell for the first time since February and foreigners decreased their holdings of Canadian securities for a second month.

Canada's dollar depreciated as much as 1.4 percent to C$1.1981 per U.S. dollar, from C$1.1820 on Oct. 17. It last traded at C$1.1925 at 2:25 p.m. in Toronto. One Canadian dollar buys 83.85 U.S. cents., Bloomberg
10/20/2008 12:03:17 PM