The greenback fell below 100 psychological to as low as 99.77 against the Japanese yen, the first time since 1995, and the single currency rallied to a fresh record high of 1.5646 versus the dollar after a Carlyle Group fund defaulted on $16.6 billion of debt, adding to turmoil in financial markets and heightened concern that American consumers were cutting back on spending.
Carlyle Capital Corp., co-founded by David Rubenstein, said in a statement it defaulted on about $16.6 billion of debt as of March 12. Lenders will ‘promptly’ take over all of its remaining assets and any remaining debt is expected ‘soon’ to go into default. Drake Management LLC said it may shut its largest hedge fund, spurring concern that losses will widen.
U.S. currency also tumbled against the Swiss franc to a fresh record low of 1.0045. However, Treasury Secretary Henry Paulson reiterated for a ‘strong dollar’ that reflects economic fundamentals. On the data front, U.S. retail sales came in at a decrease of 0.6% in February (forecast was a rise of 0.2%), versus an increase of 0.4% in January.
The greenback trimmed losses again major currencies after Standard & Poor's said on Thursday subprime write-downs could reach $285 billion, but noted that the end of the write-downs ‘was now in sight’ for large financial institutions. That prompted investors to buy back U.S. stocks and the dollar as well.
Australian dollar and New Zealand dollar rose versus the U.S. currency from 0.9330 to 0.9471 and from 0.8012 to 0.8185 respectively due to the rally in commodities. Gold rallied above $1,000 an ounce and crude oil price rose to $111.00 per barrel.
Friday will see the release of German CPI and HICP, eurozone HICP, U.S. CPI, real earnings and closely watched University of Michigan survey which is expected to drop to 69.0 in March, the lowest in 16 years, versus the 70.8 in February.