AP: Dollar hits multi-month lows as consumers weak
NEW YORK — A worsening picture of U.S. consumer spending drove the dollar lower Tuesday. It sank to multi-month lows against the euro, pound, yen and Swiss franc.
Investors had bid up the U.S. currency through the worst of the financial crisis and earlier this year as a debt crisis struck Europe. But economic data is driving investors to focus on slowing growth in the U.S., curbing the dollar's safe-haven appeal.
The euro rose to a 3-month high versus the dollar. The currency used by 16 European countries rose to $1.3212 in morning trading in New York from $1.3170 late Monday. It's the first time the euro has risen above $1.32 since May 4.
The euro has recovered since dropping below $1.19 in early June, a 4-year low, amid fears of stagnating growth in European countries and governments defaulting on debt.
"The European experiment of monetary union without political union is not collapsing as many had thought a couple of months ago," said Brown Brothers Harriman analysts. Funds set up by the European countries to bolster banks have helped ease the worst of fears, and successful debt auctions in indebted countries have reassured investors that outright default on government bonds isn't likely.
In the U.S., the prospect of slowing growth is driving down interest rates, dulling the dollar's allure against many other currencies. Federal Reserve Chairman Ben Bernanke said Monday the worst of the financial crisis is behind the U.S. — "but we have a considerable way to go to achieve a full recovery in our economy."
The Commerce Department reported Tuesday that U.S. consumers held spending steady in June as incomes remained flat. Consumer spending is the main driver of the U.S. economy.
U.S. interest rates are dropping, making U.S. assets and the dollar used to buy them less attractive.
James Bullard, president of the Federal Reserve Bank of St. Louis, said recently that the Fed should revive a crisis-era program to buy government debt if deflation seems likely.
Pumping more liquidity into markets tends to devalue the dollar.
In other trading Tuesday, the British pound hit a 6-month high versus the dollar just shy of $1.60. It rose to $1.5938 from $1.5893 late Monday.
The dollar dropped to a 9-month low of 85.69 yen before recovering to 85.76 yen from 86.52 yen late Monday.
