NEW YORK (AFP) — The dollar edged higher against the euro Tuesday, despite a record plunge in US wholesale prices, in a market wracked by economic worries.
At 2200 GMT, the euro dipped to 1.2621 dollars from 1.2645 dollars late Monday.
The dollar firmed to 96.89 yen from 96.35.
"The US dollar initially slipped on the release of the US Producer Price Index (PPI) as the report told two different stories about the inflation picture in the US," said Terri Belkas, analyst at Forex Capital Markets.
The Labor Department's headline PPI figure plunged a record 2.8 percent in October, the steepest fall since the department began reporting the data in 1947.
"However, the Federal Reserve may find it somewhat disconcerting that PPI excluding food and energy actually rose 0.4 percent during the month, pushing the annual rate to a nearly 20-year high of 4.4 percent from 4.0 percent," Belkas said..
Nigel Gault, chief US economist at IHS Global Insight, dismissed inflation concerns amid the sharply slowing world economy.
"Inflation is yesterday's problem. Commodity prices have plunged and are driving producer prices down," Gault said.
"It is remarkable that in just a few months fears have switched from inflation to deflation, a testament to how suddenly the global economy's expansion has turned into recession," he added.
Analyst Paul Ashworth at Capital Economics also highlighted the deflation risk.
"The 2.8 percent drop in US producer prices in October, the biggest monthly decline in more than 60 years, illustrates that deflation is now the primary threat," Ashworth said.
In testimony to the US Congress, Federal Reserve chairman Ben Bernanke said the dollar's status as the "premier" international currency had been reinforced by the global credit crisis.
Bernanke said the dollar had strengthened during the crisis "because there's been a lot of interest in the safe haven and the liquidity of dollar markets."
Elsewhere on Tuesday, the British pound traded mixed on news that 12-month inflation fell more sharply than expected, to 4.5 percent in October from a 16-year high of 5.2 percent in September, as oil prices dropped.
In late New York trade, the dollar rose to 1.2026 Swiss francs from 1.1977 late Monday.
The pound slipped to 1.4963 dollars from 1.4982.
Copyright © 2009 AFP. All rights reserved. More »
