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NEW YORK: The US dollar came under fresh pressure on Monday after comments suggesting US authorities may extend emergency stimulus measures, encouraging traders to move into riskier assets including gold.
Volatile market action weighed on the greenback but boosted the price of gold to a record high.
At 2200 GMT, the euro climbed to 1.4963 dollars from 1.4860 late in New York on Friday.
The yen, which like the greenback is seen as a safe haven in times of market turmoil, also lost ground. The dollar strengthened to 88.97 yen from 88.92 yen late on Friday.
Gold hit 1,174 dollars an ounce in both London and New York trading before pulling back slightly.
The dollar's slide was driven by comments from a US Federal Reserve official that he would prefer to keep the central bank's asset-buying programme active beyond its current cut-off date, analysts said.
Federal Reserve Bank of St. Louis President James Bullard said an extension of the programme, widely considered a negative factor for the US currency, would give more flexibility to US policymakers.
The comments pushed down yields on US Treasury bonds amid expectations that ultra-low rates - which encourage massive borrowing of dollars for so-called carry trades - would remain in place.
"More asset purchases and continually low yields are not exactly what dollar needs at the moment," said Sacha Tihanyi at Scotia Capital.
"The concern over the so-called dollar funded carry trade continues to persist, and with good reason. The main concern is that such cheap financing using the world's pre-eminent reserve currency will blow asset bubbles in equity and commodity markets, and in real estate in some countries."
Tihanyi said the main beneficiaries of the weak dollar are gold and other commodities which "are the perfect hedge against the impact of dollar weakness."
"However, the weakening dollar creates trade tensions and also increases the cost of commodity imports for those whose currencies not appreciating against the dollar rapidly enough to offset rising import prices," he added.
Julian Jessop of Capital Economics wrote in a note: "The latest surge in the price of gold could be justified by the desire for insurance against the risks of inflationary bubbles developing in other assets, as well as a collapse in the US dollar."
The dollar's fall came after it succeeded in rising last week as investors shunned assets viewed as risky, such as the euro, following declines on world stock markets triggered by fresh worries about the economic outlook.
However, global stock markets rose sharply on Monday as the dollar weakened.
Over the weekend meanwhile, Indian Prime Minister Manmohan Singh poured cold water on talk of dropping the dollar as the key global currency and voiced confidence that the US economy would make a strong recovery.
In late New York trade, the dollar stood at 1.0096 Swiss francs after 1.0174 late Friday.
The pound was at 1.6604 dollars from 1.6503. - AFP/de
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