GLOBAL MARKETS-Dlr hits record low vs euro,drives up oil,gold
LONDON, Feb 27 (Reuters) - The dollar slid to a record low beyond $1.50 versus the euro on Wednesday as weak U.S. data reinforced the view that U.S. interest rates have further to fall, driving up oil and gold.
European stocks were dragged lower by a slide in bank shares, bucking a broadly firmer trend in global equity markets,
The dollar hit record lows against the euro, the Swiss franc and a basket of major currencies.
Its fall against the euro was helped by a surprisingly strong reading of German corporate sentiment on Tuesday from the Ifo research instsitute which reduced expectations that the European Central Bank might soon cut interest rates.
This contrasted sharply with data on Tuesday that U.S. consumer sentiment had hit a five-year low and that the collapse in U.S. house prices accelerated to a record pace in the fourth quarter of 2007 [ID:nN26322234], further signs that the economy may be in recession.
Comments by U.S. Federal Reserve Vice Chairman Donald Kohn on Tuesday put further pressure on the dollar. Kohn said a weak economy was a bigger worry than inflation risks, suggesting a willingness to keep cutting interest rates [ID:nN2634877].
"Euro/dollar is following the interest rate differential. Now we have passed the $1.50 level, which was important. It looks like in the coming weeks we will see $1.52, which is the next big resistance level," Credit Suisse global FX strategist Marcus Hettinger said.
"We're seeing a combination of the stronger German Ifo and Kohn's comments which indicated that we will see more U.S. rate cuts," he added.
The euro was up almost half a percent on the day at $1.5047, having hit a record $1.5057 earlier EUR=. The dollar fell to a record low of 74.366 against a basket of major currencies .DXY.
COMMODITIES IGNITE
The dollar's difficulties drove commodities higher. U.S. crude oil prices neared record highs above $101 a barrel, while Brent crude oil rose above $100 for the first time.
High winter fuel demand in the United States and Europe due to cold weather and indications from OPEC that it will not increase production at its meeting next week also kept oil prices strong.
"Cold weather in the U.S. Northeast and anticipation that OPEC will not increase oil production levels at the March 5 OPEC meeting were also supportive for the oil price," David Moore, a commodities strategist at the Commonwealth Bank of Australia said in a research note.
Gold prices hit a historic high at $957.60, with the weaker dollar making dollar-priced commodities more attractive for non-U.S. investors. Continued...
