Dollar falls sharply as US house prices crumble

THE DOLLAR fell sharply yesterday after data showed that two pillars of the US economy - house prices and consumer confidence - were crumbling.

Separately, consumer confidence sank to a five-year low, while expectations for the future dropped to their lowest level in 34 years.

Ashraf Laidi at CMC Markets said: "The latest tumble in US consumer confidence is a reminder that the dollar erosion and equity market losses are not only a reflection of market anomalies related to liquidity and insolvency concerns but a clear manifestation of an increasingly despondent US consumer". The news ended the dollar's four-day rally. The euro rose 1 per cent to $1.5577 against the dollar. Meanwhile, the US currency moved 0.6 per cent lower to Y100.11 against the yen by midday in New York.

The pound edged up towards the $2 mark against the dollar, rising 0.5 per cent to $1.9971.

Marc Chandler, currency strategist at Brown Brothers Harriman, said: "A convincing move through these levels would suggest the dollar bears are reasserting their dominance and would lend support to arguments that the recent bounce was largely technical in nature".

The dollar's weakness came as the European Central Bank reiterated its concern that recent exchange rate moves had been "excessive". Lucas Papademos, ECB vice president, said: "It is in the interest of all the relevant authorities that excessive volatility in exchange rates does not have an adverse impact on economic growth at a time when the pace of economic activity is moderating." - (Financial Times service)

© 2008 The Irish Times

This article appears in the print edition of the Irish Times