Dollar slides, sending gold to record high

The US dollar slid against the euro on Monday on concerns that the Federal Reserve may keep emergency stimulus measures in place for a while longer, helping push gold prices to a record high level. In late morning trading here, the euro climbed to 1.4977 US dollars from 1.4860 late in New York on Friday. Against the Japanese currency, the US dollar fell to 88.88 yen from 88.92 yen late on Friday. The price of gold reached an all-time peak of 1,167.88 US dollars an ounce. Comments by a US Federal Reserve official that he would prefer to keep the central bank's asset-buying programme active beyond its current cut-off date pushed the dollar lower, analysts said. Federal Reserve Bank of St. Louis President James Bullard said an extension of the programme, widely considered a negative factor for the US currency, would give more flexibility to US policymakers. "Central bank rhetoric provided fresh incentive" to drive up the euro, said Jane Foley, analyst at online trading firm Forex.com. "Gold prices printed another fresh high on the back of dollar weakness with Bullard's comments promoting the discussion of medium-term inflation potential, though economic data continues to indicate a absence of price pressures," Foley added. Gold is seen as a safe-haven investment amid the threat of rising prices. The dollar's fall meanwhile comes after it succeeded in rising last week as investors shunned assets viewed as risky, such as the euro, following falls on world stock markets triggered by fresh worries about the economic outlook. However, global stock markets rose sharply on Monday as the dollar weakened. Over the weekend meanwhile, Indian Prime Minister Manmohan Singh poured cold water on talk of dropping the US dollar as the key global currency and voiced confidence that the US economy would make a strong recovery.

In an interview ahead of his arrival Sunday on a state visit to the United States, the 77-year-old trained economist dismissed talk in some emerging economies about replacing the US dollar as the key international reserve currency. "As far as I can see, right now there is no substitute for the dollar," Singh said. China's central bank has proposed a shift away from the US dollar to a basket of currencies that also includes the euro and yen, calling excessive reliance on the greenback a destabilising factor for the global economy. But Singh said: "I think even the Chinese are hesitant." "The fact that they hold 2.5 trillion dollars in reserve assets (and) they have not disposed of even a fraction of that -- that's a measure of the confidence that the world has in the dollar." In London on Monday, the euro was changing hands at 1.4977 US dollars against 1.4860 US dollars late on Friday, at 133.12 yen (132.16), 0.9011 pounds (0.9002) and 1.5109 Swiss francs (1.5119). The dollar stood at 88.88 yen (88.92) and 1.0088 Swiss francs (1.0174).
The pound was at 1.6619 dollars (1.6503).