The dollar headed towards a recent two-month low against the euro and three-month low versus the Swiss franc on Wednesday as markets prepared for potential damage to the United States' economy from higher fuel costs.
Investors have been selling the dollar since late May after world oil prices soared to their highest levels in two decades, triggering concerns US consumer spending and business investment could slow down and delay interest rate hikes.
While Europe and Asia may also be hurt by high energy costs, many investors saw currencies such as the euro and the Swiss franc as good defensive bets. These currencies are typically less sensitive to global growth cycles.
"Concerns about oil are driving markets across the board," said Patrick Bennett, currency strategist at Commerzbank in London.
"Europe is less exposed than the US to oil, less exposed to any disruptions in the Middle East, and this is driving gains in euro/yen and euro/dollar."
At 1130 GMT, the dollar traded down 0.35 percent on the day at $1.2283. A move beyond last week's low of $1.2296 would be the greenback's weakest since early April.
It traded 0.28 percent lower against the Swiss franc at 1.2436. A move below 1.2423 would be the dollar's weakest since late February.
The euro was 0.2 percent down on the yen at 135.63.
Earlier on Wednesday, oil rose above $42 a barrel to 21-year highs on fears of potential supply disruptions in Saudi Arabia after deadly attacks by Islamic militants last week.
Dealers said the market would be carefully watching the outcome of an Organisation of Petroleum Exporting Countries meeting on Thursday, at which the cartel is expected to consider an increase in production quotas that could ease rising prices.
However, Saudi Oil Minister Ali al-Naimi said extra oil output might not immediately bring down high prices. He did reiterate that oil facilities in Saudi Arabia, the world's largest crude producer, were "very secure."
Comments
Comments are closed.