By SPA
Hong Kong : The dollar teetered on the brink of the 100 yen mark on Thursday as doubts set in about the U.S. Federal Reserve’s latest bid to support credit markets, sending stocks tumbling and keeping oil close to $110 a barrel, Reuters reported.
The Fed’s offer to accept mortgage bonds as collateral had sparked the biggest daily gains for five years on the Dow Jones industrial average and Nasdaq on Tuesday, but worries about the U.S. economy flooded back on Thursday.
The fall in the dollar helped U.S. crude oil break above $110 a barrel for the first time, although it trickled back to $109.59 in Asian trade. Gold firmed above $985 an ounce, within
sight of a record $991.90 struck on March 6.
Financial bookmakers expected Britain’s FTSE 100 and Germany’s DAX to open down as much as 1.6 percent and France’s CAC 40 to fall about 2 percent.
“There remains a degree of caution as we are seeing a perfect storm of economic recession factors hitting the U.S. and that’s creating uncertainty despite the fact that the Fed has come up with rather creative and elegant ideas,” said Savanth Sebastian, equities economist at CommSec.
“Credit markets remain very tight although the Fed has created a market for some of those assets at the heart of the credit crisis.”
The New York Board of Trade’s U.S. dollar index struck an all-time low of 71.990 as the dollar tumbled to a 12-year low as far as 100.03 yen while the euro hit a new high of $1.5587.
The slide came despite remarks from U.S. President George W. Bush on Wednesday that he would like to see a stronger dollar and expressed concern its falling value was one cause of
soaring U.S. energy prices.
The dollar could continue to fall unless authorities act further to ease concerns about the U.S. housing sector and ailing credit markets, said Tomoko Fujii, head of economics and strategy for Japan at Bank of America.
“There is no reason to buy the dollar,” Fujii said. “It’s not as if the U.S. government is going to step in and buy up every mortgage,” she added.