The euro rose sharply against the dollar on Wednesday as investors looked to take on more risk after strong US company results and housing data bolstered confidence in the economic prospects. Dealers said markets bounced back strongly from the shock Monday when Standard & Poor''s downgraded its US debt outlook to ''negative'' from ''stable'' and warned of worse to come if Washington fails to right the public finances.
The S&P action, its first ever downgrade of US debt, sent markets reeling but by Wednesday, much of the concern was put to one side as investors took company results as convincing evidence that the underlying economy is strong. In late London trade, the euro climbed to $1.4520, taking it back to levels last seen in January 2010 and up from $1.4334 in New York late Tuesday while the dollar was flat at 82.58 yen after 82.57 yen.
Gold hit a record $1,504.25 an ounce in early trade and closed at $1,501 dollars, up from Tuesday''s $1,490.50, taking silver with it to $45.13 an ounce where it was last traded in 1980. Gold and the precious metals serve as a traditional safe-haven in times of uncertainty and investors may be using them now to hedge their bets against a backdrop of Middle East unrest and debt problems in Europe and the US.
On the bond markets, rates on Greek and Portuguese 10-year benchmark bonds soared to record highs ever further beyond remotely sustainable levels. For the Greek 10-year bond the yield, or rate of return for buyers, was 14.592 percent, up from 14.337 percent Tuesday, with the Portuguese bond at 9.129 percent, up from 8.950 percent. Two-year Portuguese bonds jumped to nearly 22 percent, a level which Laurent Geronimi of Swiss Life Gestion Privee said showed that investors were betting Lisbon will default despite managing to raise short-term funds on Wednesday.
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