US dollar weak against European currencies this week

Story link: US dollar weak against European currencies this week

This week, the US dollar hit its lowest level since May against a number of European currencies as the fallout from Hurricane Katrina continued to grow. A special worry was rising gasoline prices after the storm shut down 10 percent of refining capacity in the United States. It was said that gasoline prices could rise to $3.50 per gallon for regular unleaded, and concerns surrounded the possible impact of such prices hikes on the growth of the US economy.

Another factor in the dollar’s weakness was the possibility that interest rates, the rise of which have been instrumental in the dollar’s rally this year and which were expected to rise twice more before the end of the year, are now widely expected to rise only once more before the beginning of 2006. Additionally, a series of other economic reports released during the week which indicated that the US economy was feeling pressured even before Katrina hit on Monday did not help the dollar’s outlook.

The US dollar lost 2.3 percent during the week to Sfr1.2290 in relation to the Swiss franc, traditionally seen as a safe investment in times of crisis. The greenback was also down by 2.1 percent over the week against sterling, to $1.8398 and fell 2 percent to $1.2537 in relation to the euro.

In addition, the dollar fell by 3.1 percent to R625 in relation to the South African Rand, but it only was down 0.4 percent to ¥109.67 against the yen, which was having its own troubles in relation to the rise in oil prices.

Elsewhere, the Norwegian krone gained 1.9 percent to NKr7.7874 versus the euro, a 28-month high, largely due to its status as a major exporter of oil.