Dollar tumbles, gold hits record high

September 29, 2010
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, LONDON, Sept 29 – The dollar sank against the euro and hit a record low point against the Swiss franc on Wednesday while gold struck a new all-time peak, as traders mulled possible US moves to boost its ailing economy.

Meanwhile in Asia, China\’s central bank pledged to increase the flexibility of its exchange rate just as US lawmakers were to vote on legislation that could punish Beijing for alleged currency manipulation.

The People\’s Bank of China promised to continue to implement an "appropriately loose monetary policy" and "increase currency flexibility", according to a statement on its website.

It also said it would "gradually improve the exchange rate setting mechanism."

The central bank\’s wording was almost identical to that used in a similar pledge in June. Since then, the yuan has risen by less than two percent against the US dollar.

The US House of Representatives was to vote later on Wednesday on legislation to expand the powers of the US Commerce Department by allowing it to impose tariffs when another nation is found to be manipulating its currency\’s value.

The measure enjoyed strong support from President Barack Obama\’s Democratic allies and their labour union supporters, as well as his Republican foes, and was expected to win approval.

US lawmakers have redoubled their accusations that Beijing keeps the yuan — and therefore Chinese exports — artificially cheap, driving US manufacturers out of business and costing thousands of US jobs.

In London, commenting on the weakness of the dollar, Rajesh Patel, a trader at firm Spread Co in London, said: "The dollar bashing continues unabated today."

He said: "Quantitative easing seems to be well and truly at the forefront of traders\’ minds."

He also said: "Gold is being brought along for the ride, as cheaper dollars makes gold more attractive."

In early morning deals, the European single currency soared to a five-month high point of 1.3639 dollars — last reached in mid-April — and then fell slightly.

The Swiss franc, which is a traditional safe-haven investment, rose to a historic high level against the US unit, hitting just 0.9734 franc for a dollar.

The dollar has weakened as new negative data on the US economy strengthened forecasts that the Federal Reserve will pump in more money, known as quantitative easing.

Sterling steadied on Wednesday, one day after sliding as a Bank of England policymaker suggested that the central bank should consider pumping the British economy with more new money.

The weakness of the dollar pushed gold prices to a record high point of 1,313.45 dollars per ounce in London, after smashing through the 1,300-level late last week.

Last week the US Federal Reserve\’s policy committee said it was "prepared" to step in if the economy faltered further.

Speculation on US monetary easing intensified following two disappointing reports on Tuesday showing a drop in home prices and a sharp fall in consumer confidence.

In London on Wednesday, the euro changed hands at 1.3589 dollars against 1.3583 dollars late in New York on Tuesday, at 113.63 yen (113.88), 0.8589 pounds (0.8593) and 1.3273 Swiss francs (1.3255).

The dollar stood at 83.70 yen (83.84) and 0.9767 Swiss francs (0.9756).

The pound was at 1.5822 dollars (1.5801).

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