Dollar Rises as Russia Rate Cut Fuels Concern Rebound to Falter

By Matthew Brown

Sept. 29 (Bloomberg) -- The dollar rose for a second day against the euro as evidence economies have yet to shake off the worst effects of the global recession spurred demand for the safety of the U.S. currency.
The dollar traded within less than a third of a cent of its strongest level in two weeks versus the euro as Russia’s central bank cut its main interest rate. The yen weakened against the dollar after Japan’s Finance Minister said the government may take action in markets to curb gains that are hurting exports. The Australian dollar approached its strongest level in 13 months against the U.S. currency as traders added to bets the central bank will raise interest rates this year.

The Russian rate cut “is a signal that things are not as positive as they appeared previously, and that’s positive for the dollar and the yen,” said Adam Cole, head of global currency strategy at Royal Bank of Canada Europe Ltd. in London. “Among Group of 10 countries rate cuts have gone off the agenda, and people are looking at who hikes first.”

The dollar strengthened to $1.4586 per euro as of 8:42 a.m. in London, from $1.4622 in New York yesterday, when it touched $1.4565 per euro, the highest level since Sept. 15. The yen weakened to 89.79 per dollar, from 89.63. Japan’s currency was at 130.95 per euro, from 131.06.

To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net
Last Updated: September 29, 2009 03:56 EDT