Dollar bounces up with Wall Street

Dollar bounces up with Wall Street

	Published : Tue, 27 Nov 2007 22:45 By : Agencies Print this Story

NEW YORK (AP) - The dollar coasted upward with a surging stock market Tuesday, ignoring a nerve-racking American consumer confidence report and fresh evidence of a housing slump.

Wall Street rebounded from Monday's losses after Citigroup Inc., the nation's largest bank, announced late Monday that the Abu Dhabi Investment Authority will pump $7.5 billion into the floundering company.

The dollar inched up against the euro. Although the 13-nation single currency spiked as high as $1.4908 in Europe after a survey showed increased business confidence in Germany, Europe's largest economy, the euro scuttled down to $1.4841 late in New York, less than the $1.4868 it bought Monday.

The British pound fell against the dollar, to $2.0687 from $2.0720 Monday, and the dollar rose to 108.59 Japanese yen from 107.86 yen.

The euro hit an all-time high of $1.4966 on Friday, the latest in a string of recent records triggered by worries about credit and instability in the United States.

But investors ignored weak American economic data, and the dollar rode the back of rising equities.

The Dow Jones industrial average rose by 215 points, or 1.69 percent, Tuesday after Monday's sell-off.

'Markets are more nervous about the banking system and the news of the investment in Citigroup by Abu Dhabi is what people focused on,' not disheartening economic reports, said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. 'People felt a little bit more free to take on some risk, got back into carry trades and ended up giving the dollar support.'

However, market expectations for future rate cuts were somewhat reinforced, he said, after the release of data on consumer sentiment and housing prices.

Although lower interest rates can jump-start an economy, they can also weaken a currency as investors transfer funds to countries where they can earn higher returns.

The Conference Board reported that its Consumer Confidence Index fell for a fourth consecutive month in November to 87.3, below analysts' expectations.

The reading is the lowest in two years. Retailers are concerned about recession-fearing shoppers who might hesitate to spend money during the upcoming holiday shopping season.

More bad tidings came with the release of Standard & Poor's Case-Shiller home price index, which showed U.S. home prices fell 4.5 percent in the third quarter from a year earlier, the sharpest drop since S&P began its nationwide housing index in 1987.

The index also showed that prices fell 1.7 percent from the previous three-month period, the largest quarter-to-quarter decline in the index's history.

In other New York trading, the Canadian dollar touched below parity with the U.S. dollar at 99.99 U.S. cents before rising to $1.0027 in late trading. The Canadian currency traded at $1.0124 Monday.

The Canadian currency is commodity-driven, boosted by rising prices of Canadian exports such as gold and oil. It has dropped from its height of $1.1039 on Nov. 7 as gold prices have fallen and a Bank of Canada interest rate cut looms.

The dollar also rose against the Swiss franc to 1.1043 Tuesday from 1.0988.