Euro breaches 1.49 dollars; gold hits record high
Posted: 18 November 2009 2009 hrs

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LONDON - The European single currency rose above 1.49 dollars on Wednesday, as the US unit was plagued by poor investor sentiment, which in turn pushed gold prices to a new record peak, dealers said.

In late morning trading here, the euro rose as high as 1.4960 dollars, before pulling back to 1.4941. That compared with 1.4873 late in New York on Tuesday.

Against the Japanese currency, the dollar eased to 89.13 yen from 89.25 yen late on Tuesday.

In commodity markets, gold prices rose in London to an all-time high near 1,150 dollars an ounce, boosted by the weak level of the US currency, analysts said.

Gold hit a record peak of 1,148.03 dollars an ounce in trading on the London Bullion Market after reaching a series of new pinnacles in recent weeks.

A weak greenback makes dollar-priced assets such as gold cheaper for buyers using stronger currencies, tending to stimulate demand for them.

Traders said the dollar's overall weak tone remained intact owing to the prospect of US interest rates remaining low for some time yet.

"The basic market trend of a weak dollar has not changed," said Hideaki Inoue, chief foreign exchange manager at Mitsubishi UFJ Trust and Banking Corp.

"The Fed has signalled that it will keep interest rates low for a while."

The greenback has weakened steadily against the euro in recent months as the Federal Reserve, the US central bank, has maintained its benchmark interest rate at near zero.

European Central Bank chief Jean-Claude Trichet on Tuesday joined his US counterpart in voicing support for a stronger dollar.

"The strength of the dollar... is not only in the interests of the United States but the entire international community as well," Trichet told a French newspaper.

His remarks followed Fed chief Ben Bernanke's comments on Monday, when he stressed the importance of strengthening the dollar.

The US currency is being used by investors for so-called carry trades in which they borrow greenbacks at low rates to invest in higher-yielding assets overseas, increasing pressure on the dollar.

Dealers were meanwhile awaiting US consumer prices data due Wednesday to look for any signs of deflationary pressures that would encourage the Fed to maintain its highly stimulative monetary policy.

Elsewhere on Wednesday, the British pound advanced against the dollar as dealers digested news that Bank of England policymakers were split three ways on their recent decision to pump more new money into the recession-hit economy.

The BoE agreed earlier this month to pump out another 25 billion pounds (28 billion euros, 42 billion dollars) of fresh cash -- a move backed by seven of the nine policymakers -- including the bank's governor Mervyn King, minutes of their meeting showed.

In London on Wednesday, the euro was changing hands at 1.4941 dollars against 1.4873 dollars late on Tuesday, at 133.11 yen (132.76), 0.8887 pounds (0.8848) and 1.5109 Swiss francs (1.5112).

The dollar stood at 89.13 yen (89.25) and 1.0112 Swiss francs (1.0157).

The pound was at 1.6812 dollars (1.6808).

On the London Bullion Market, the price of gold jumped to 1,146.26 dollars an ounce from 1,134.75 dollars an ounce late on Tuesday.


- AFP/ir