Dollar index hits 6-week high

The dollar hit a six-week high versus a currency basket on Monday after U.S. leaders failed to agree deficit-cutting measures, darkening the fiscal outlook and prompting a shift from riskier currencies into the safety of the U.S. currency.

The dollar index rose to 78.477, its highest since Oct. 10 as debt problems deteriorated on both sides of the Atlantic due to ongoing worries that wrangling between European leaders will protract the bloc’s debt crisis.

Investors sought growing yield premiums to hold Italian and Spanish bonds versus benchmark German debt, pushing the euro to the day’s low versus the dollar.

An overwhelming Spanish vote in favour of a new government failed to instill optimism about Madrid’s ability to deal with its economic problems.

The failure of Washington’s “supercommittee” triggered selling in risky assets, with European shares falling 2 percent while currencies considered to be higher risk, including the euro and the Australian dollar also took a hit.

For the moment, Washington is still expected to push ahead with $1.2 trillion in automatic spending reductions despite its inability to find appropriate budget savings, keeping at bay the risk of an immediate credit rating cut.

So long as Washington avoids a lower rating — which was slashed to AA+ a few months ago — analysts believe the dollar may continue to benefit from safe-haven flows.

Article viewed on Oye! Times @ www.oyetimes.com

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