Dollar Gains as Homeowners, Job-Seekers Struggle

The dollar's appeal as a safe haven sent it higher in trading Thursday after reports on housing and unemployment raised fears that the economy will be weak next year.

FILE - In this February 27, 2008 file photo, euro coins and dollar bills are seen in Frankfurt,...

FILE - In this February 27, 2008 file photo, euro coins and dollar bills are seen in Frankfurt, central Germany. The dollar's appeal as a safe haven sent it higher against other major currencies Thursday, Nov. 19, 2009, after reports on housing and unemployment raised fears the U.S. economy will be weak next year. (AP Photo/Michael Probst, File)

(AP)

Some analysts said the slight rebound could signal that the dollar will stabilize against major currencies and halt an eight-month slide.

U.S. Treasurys, based in dollars, became an attractive alternative to riskier investments during the worst of the economic crisis. But the stock market has rallied since March, and the dollar has tumbled, as prospects for an economic recovery have made investors more willing to take risks. Traders have sold the dollar to invest in U.S. or foreign stocks or commodities such as oil.

On Thursday, said Michael Woolfolk, senior currency strategist at Bank of New York Mellon, there was "a dialing back of risk."

"People are starting to second-guess the strength of the U.S. recovery, said David Gilmore of Foreign Exchange Analytics in Essex, Conn. "Some are beginning to raise the issue of a double-dip" recession. That occurs when the economy begins to recover briefly from a recession only to be dragged back under.

That sent the dollar higher. In afternoon trading in New York, the 16-nation euro dropped to $1.4865 from $1.4940 and the British pound slid to $1.6617 from $1.6718. The dollar slipped to 88.74 Japanese yen from 89.48 yen.

Some analysts said Thursday's trading could be a sign that investors are realizing they had become overconfident about an economic rebound.

"We had thought for some time that the markets were running ahead of the fundamentals in terms of how confident they should be about a global recovery," said Nigel Gault, an economist at IHS Global Insight, a private economic forecasting firm.

Gault said the next major move for the dollar could be to climb higher by the middle of next year as a stronger economy leads the Federal Reserve to begin to boost U.S. interest rates.