Dollar Holds Near 2-year High

The dollar held close to a two-year high against the euro and a five-year peak against the pound on Thursday as investors continued to shy away from risky assets as the prospects for the global economy continued to darken.

Analysts said the dollar was benefiting as many positions in commodities, equities and other assets markets had been funded by selling the low-yielding dollar.

The dollar rose 0.1 per cent to $1.2819 against the euro, having hit a two-year peak of $1.2726 earlier in the session, and gained 0.1 per cent to $1.6230 against the pound, which on Wednesday tumbled to a five-year low of $1.6148 after the Bank of England said the UK economy was in recession.

The dollar also advanced elsewhere, rising 0.1 per cent to SFr1.1655 against the Swiss franc, climbing 0.6 per cent to C$1.2621 against the Canadian dollar and gaining 1 per cent to $0.6647 against the Australian dollar.

Meanwhile, the New Zealand dollar lost ground, falling 0.5 per cent to $0.5899 against the dollar after the Reserve Bank of New Zealand cut interest rates by 100 basis points to 6.5 per cent. The RBNZ clearly indicated that it expected to lower rates further in coming months, but that the extent and speed of these cuts depended on domestic inflation pressures as well as global financial conditions.

The yen rose 0.3 per cent to Y97.53 against the dollar, climbed 0.4 per cent to Y125.06 against the euro and gained 0.5 per cent to Y158.22 against the pound., Financial Times
10/23/2008 5:32:16 AM