Dollar Rises Most Since July 2006 as Investors Reduce Risks

The dollar rose the most against the euro since July 2006 as credit-market losses pushed investors to reduce holdings of assets in higher-yielding currencies.

The currencies of Australia, South Africa, New Zealand and Brazil led the decline. Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said. The dollar touched a record low last week against its major trading partners.

The dollar is trading on a firm footing against the majors, said Matthew Perrier, a strategist with BMO Capital Markets in Toronto. The recent bout of risk aversion led the hedge fund community to take profits where they could be found to pay back losses in other areas. That has strengthened the dollar.

The dollar rose 0.9 percent against the euro to $1.4548, from $1.4678 last week. It fell to an all-time low of $1.4752 on Nov. 9. The U.S. currency has weakened 9.3 percent against the euro this year, extending its loss over the past five years to 30.4 percent.

Yen Rally

Risk aversion also pushed up the yen against all 16 most- actively traded currencies. The yen rose 0.8 percent to 109.86 per dollar and touched 109.13, the highest since May 2006. The Japanese currency also gained 1.6 percent to 159.83 per euro.

The Japanese currency rose as much as 5.1 percent versus the Australian dollar, 2.3 percent against the euro and 4.2 percent versus the South African rand as speculators retreated from carry trades.

Source - Bloomberg