Dollar hits 11-month high on global growth worry
The dollar soared to an 11-month high against a basket of major currencies on Wednesday as more investors rushed to dump currencies like the euro and Australian dollar on a souring global economic outlook.
The dollar has also jumped on a tumble in oil prices below $110 a barrel after Hurricane Gustav left energy facilities in the Gulf of Mexico mostly unscathed. As oil prices dropped, more hedge funds and investors have liquidated bets favouring higher-yielding currencies and commodities.
The hefty losses of hedge fund Ospraie Management LLC on the sell-off in energy commodities highlights the troubles some funds are facing.
The euro hit a seven-month low against the dollar and the sterling slumped to a 2-½ year low as market players cut positions before policy decisions by both the European Central Bank and the Bank of England on Thursday.
The Australian and New Zealand dollars fell more than 1 percent to a one-year low against the dollar. Selling of the Aussie picked up after data showing Australian economic growth slowed slightly more than expected in the second quarter.
The sharp slide in the euro and Aussie has also forced players to cut back on carry trades in which the low-yielding yen was used to fund positions in higher-yielding currencies.
"Investors are unwinding positions in the yen crosses
on the growing view that these currencies have now entered a medium-
to long-term downtrend," said Hiroshi Yoshida, a trader at Shinkin
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