The dollar dropped the most in more than a week against the euro and fell versus the Swiss franc on concern Israeli attacks on Hamas in the Gaza Strip will fan Middle East tensions and disrupt oil supplies to the U.S. The British pound weakened to a record low against the euro, moving closer to parity, after a survey of U.K. estate agents and surveyors forecast home prices will slide further in 2009. The greenback also fell versus the yen before housing and manufacturing reports this week that may show the U.S. economy is slipping further into recession. “It looks more like a reaction to crude and gold, in part because of the Middle East,” said Scott Ainsbury, a portfolio manager who helps manage $14.6 billion in currencies at New York-based hedge fund FX Concepts Inc. “People are looking for a reason to sell the dollar.” The dollar slid to $1.4244 per euro at 10:28 a.m. in New York, from $1.4028 on Dec. 26. It weakened as much as 2.3 percent, the biggest intraday decline since Dec. 17. The dollar fell 0.8 percent to 90.05 yen from 90.81, touching 87.14 yen on Dec. 17, the lowest level since 1995. It dropped 2.5 percent to 1.0428 francs. The euro increased 0.9 percent to 128.56 yen. Norway’s krone gained 2.3 percent to 6.9639 versus the dollar, and Canada’s currency advanced 0.4 percent to C$1.2176, as crude oil gained on Mideast tension. The price of oil and the krone have traded in tandem more than 90 percent of the time this month, according to Bloomberg calculations. Norway is the world’s fifth-biggest oil exporter, while commodities generate about half of Canada’s export revenue. Sweden’s Krona The Swedish krona was the biggest gainer versus the dollar among the 16 most actively traded currencies, strengthening 3.6 percent to 7.7078 percent. The krona has dropped 16 percent against the dollar this year. “Markets are very, very thin,” said Geoffrey Yu, a foreign- exchange strategist in London at UBS AG, the world’s second- largest foreign-currency trader. “We’ve seen abnormal moves lately, and these things can easily reverse in the new year.” The pound slid for a sixth day versus the euro, weakening as much as 2 percent to a record 98 pence as Hometrack Ltd. said in a report that residential property prices fell 8.7 percent on average in the U.K. this year. Prices are forecast to fall a further 10 percent in 2009 and 3 percent more the following year, the property researcher said on Dec. 22. Pound’s Decline Sterling headed for a 25 percent drop against the euro in 2008, its biggest annual decline ever, on speculation a deepening U.K. slump may prompt the Bank of England to make further cuts in the target lending rate, which at 2 percent is the lowest since 1951. The pound may rebound as investors start betting on a recovery in the U.K. economy, according to the world’s biggest currency traders. Sterling will strengthen 14 percent against Europe’s currency next year, according to the median forecast of 42 analysts and strategists surveyed by Bloomberg. Deutsche Bank AG, the largest trader as measured by Euromoney Institutional Investor Plc, predicts a 20 percent gain. The U.K. currency rose 0.3 percent to $1.4624 today. The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 1.5 percent to 79.711 as Israeli air strikes in the Gaza Strip killed more than 285 people, prompting protests across the region from Saudi Arabia to Syria and raising concern about the supply of crude oil. Crude Oil Gains Crude oil for February delivery rose as much as $4.49, or 12 percent, to $42.20 a barrel in electronic trading on the New York Mercantile Exchange. Gold for immediate delivery jumped $14, or 1.6 percent, to $883.30 an ounce in London. The U.S. currency also slid on speculation housing and manufacturing reports this week will show the world’s largest economy is deteriorating. Home prices for the 20 largest metropolitan areas fell 17.9 percent in October from a year earlier, the biggest decline since record keeping began in 2001, according to a Bloomberg News survey of economists before the S&P/Case-Shiller index is published tomorrow. The Institute for Supply Management’s December factory index dropped to 35.4, the lowest reading in almost three decades, a separate Bloomberg survey shows. The ISM report is due Jan. 2. The Federal Reserve this month cut its benchmark interest rate to as low as zero for the first time and shifted its focus to debt purchases in an effort to revive the economy. “The fact that rates are near zero is the most important factor for the dollar,” said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp., a custodian of $23 trillion of financial assets. “The Fed has turned on the printing presses, and that’s not good for the currency, from a supply and demand perspective.” The U.S. currency has dropped 19 percent versus the yen this year, the largest loss since 1987. The dollar has increased 2 percent versus the euro.

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