Surge for the dollar as global fears rise

Financial Times
Saturday, Aug 16, 2008

The dollar surged to a two-year high against the pound and a six-month peak against the euro on Friday, as fears about spreading economic gloom triggered a sell-off in commodities.

Against sterling, the US currency notched up its 11th consecutive day of gains – its longest uninterrupted rise in more than 35 years – as markets became increasingly convinced that the US was best-placed to weather the global downturn.

The strong dollar rebound undermined sentiment in the gold market, where prices fell below $800 for the first time this year to $774.90 a troy ounce, almost a quarter lower than early March’s record $1,030.80.

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Prices for crude oil, platinum, copper, aluminium, corn and soyabeans have also retreated from records hit this year, prompting speculation that commodity prices have reached a turning point.

“The golden age when commodity prices could only go up is gone,” said Marco Annunziata, chief economist at Unicredit.

Military tensions between Russia and Georgia have offered little support to the price of gold, while oil prices have continued to fall in spite of interruptions to two key pipelines carrying crude from the Caspian sea to Turkey.

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