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Dollar gains on economic unease

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(Globalpost/GlobalPost)

The dollar headed higher against the euro Monday amid a flight to safety after China's weak growth report and a plunge in the gold price, while the yen rose after a US warning against possible Japanese competitive devaluation.

The euro traded at $1.3048 at 2245 GMT, down from $1.3106 late Friday.

The dollar was also stronger against the British pound and the Swiss franc.

But the dollar fell to 96.56 yen, down from 98.35 the previous session.

The euro traded at 125.98 yen compared with 128.91.

Currency markets were roiled anew by Monday's surprisingly weak economic data out of China. Growth in China slowed to 7.7 percent in the first quarter, well below the 8.0 median forecasts of analysts and below the 7.9 percent seen in the previous quarter.

The weak China figures came on the heels of poor US retail sales and jobs data in recent weeks. The US dollar often gains during times of economic uncertainty as investors flee to safe assets.

"Between this morning's softer US economic reports, last night's weaker Chinese data and this month's disappointing US retail sales and jobs numbers, there are definite signs that the global recovery is losing momentum," said Kathy Lien of BK Asset Management.

"The US dollar traded higher against all of the major currencies today except for the Japanese yen," Lien added.

The yen continued to gain ground after the US Treasury Department said Friday it was monitoring Tokyo's policies and urged it to avoid a "competitive devaluation" of its currency.

"It is clear that the US Treasury wanted to send a statement on the yen," observed Nomura Foreign Exchange.

"That said, the statement itself is not dramatic, and is subordinated to the much stronger China comments."

That was a reference to the Treasury's statement in its semi-annual forex report that the yuan remained significantly undervalued.

A plunge in the gold price, leading a general commodities rout, also fed the forex trade.

Gold for April delivery sank 9.4 percent at $1,360.60 an ounce on the New York Mercantile Exchange.

Lien attributed the historic drop in the price of gold to the growing impatience of investors who expected inflation to be a bigger issue.

"With returns in equities becoming more attractive, a larger subset of investors are giving up on their losing inflation hedge and going on the hunt for yield," Lien wrote.

The British pound traded at $1.5293, down from $1.5335 late Friday.

The dollar traded at 0.9306 Swiss francs, up from 0.9273 francs the previous session.

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http://www.globalpost.com/dispatch/news/afp/130415/dollar-gains-economic-unease