US dollar hits 14-month low

The US dollar fell to a 14-month low on Tuesday against major currencies, with investors betting the United States is likely to bring up the rear in a global economic recovery led by Asia and commodity-producing countries. The euro rose to nearly $1.49, its highest level since August 2008.
Just before the demise of investment bank Lehman Brothers' pushed the global banking system to the edge of collapse and sparked a frenzy of dollar buying by investors eager to dump riskier currencies. Hopes for a stronger recovery outside the United States lifted crude oil prices to a seven-week high and pushed gold to a fresh record.
While demand for commodity-linked currencies such as the Canadian dollar and Brazilian real remained high. Investors fear a weak US labour market and a protracted recovery will keep interest rates near zero well into 2010.
That makes holding low-yielding US dollars unattractive, and any appeal the greenback has would be dulled further if other major central banks start lifting interest rates as growth picks up. Federal Reserve Vice Chairman Donald Kohn on Tuesday bolstered the view that US interest rates will stay low for now, saying a tepid US economic recovery meant rising inflation was not an imminent threat.
"People are optimistic about global growth in the fourth quarter and beyond, so money is coming out of the US and the dollar has gone south against most majors, especially commodity currencies," said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. "That should continue for awhile, especially if the Fed keeps rates where they are."
The euro was last up 0.4 percent to $1.4826 after earlier hitting $1.4876, the highest since August of 2008. Citigroup technical strategists said in a note to clients that $1.4968 is the next key level for the euro zone's currency. Sterling rose 0.6 percent to $1.5889 while the dollar fell 0.1 percent to 89.78 yen.
The dollar also hit a 14-month low against its Canadian counterpart at C$1.0268 before recovering to C$1.0360, a touch above Monday's closing level in New York. Many investors, though, expect the US government to do little to support the dollar other than issue from time to time its oft-repeated "strong dollar" mantra, as a softer currency should aid the weak economy and boost export revenues.