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New York: The dollar retreated broadly yesterday, posting its steepest loss against the euro in two weeks, hurt by concerns about the health of the US economy and the global financial sector.
A private sector report showed US consumer confidence in March fell to a five-year low, while expectations for the future dropped to their lowest level in 34 years. In addition, US home prices for January declined in 16 of the 20 regions measured, according to an index.
In the financial sector, things were not much better. The interbank cost of borrowing three-month dollar, sterling and euro funds rose yesterday, suggesting financial institutions were still hoarding cash despite efforts by central banks to inject liquidity into the money market.
"We still have many issues out there and the perceived dollar rally earlier was probably just that," said Axel Merk, portfolio manager of the $300-million Merk Hard Currency Fund in Palo Alto, California.
"The credit contraction is not over. What the Federal Reserve has done is stabilise the financial system, which was necessary, but that doesn't mean that the US economy will go back to growth," he added.
In midday New York trading, the euro was up one per cent on the day at $1.5586, posting its biggest one-day rise since March 12. The single currency is down roughly 1.9 per cent from last week's record high at $1.5904, but still up 6.8 per cent since the beginning of the year.
The dollar was down 0.8 per cent against the yen at 99.900 yen. erasing earlier gains above 101 yen. Against the Swiss franc, the dollar fell 1.00 per cent to 1.0084 francs.
Record low
Last week, the dollar tumbled to a record low against the euro, Swiss franc, and a nearly 13-year trough versus when the announcement of Bear Stearns' takeover at a rock-bottom price stoked fears that other major financial firms could be casualties in the crisis.
The greenback had rallied in the lead-up to the Easter break last week after a sharp wave of profit-taking in commodity markets saw investors retreat to cash.
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