RTTNews - The dollar was mostly stronger versus other major currencies on Monday as traders looked to the safety of the world's reserve currency amid fears that an economic recovery is not as close at hand as once hoped.
Stocks continued to pull back on speculation their recent rally was pre-mature, given the tenuous nature of the economic situation. Since hitting multi-month lows in June, the dollar has been stuck in the mud, but appears poised to firm up, particularly against resource-linked currencies, which could falter as commodities prices drop.
The dollar edged higher versus the euro, rising to 1.3850. Still, the buck remained within the past week's narrow range between 1.3800 and 1.4000. Earlier in June, the dollar dropped to a 5-month low of 1.4338.
Monday, European Central Bank President Jean-Claude Trichet warned that there are still risks of a sudden emergence of unexpected financial turbulence.
Speaking in a conference in Madrid, Trichet said, We are in uncharted waters, and there are still risks of a sudden emergence of unexpected financial turbulence.
The dollar also firmed up versus the sterling, rising to 1.6340. Its been a choppy stretch for the pair, with the dollar unable to move very far from a 6-month low of 1.6662, set in early June.
House prices in the UK dropped in June, after rising consecutively in the preceding four months, a report from the property website Rightmove showed Monday.
Versus the yen, the dollar was steady at 96, in the middle of its week-long trading range.
Crude and other commodities prices plunged on Monday after the World Bank reduced its global GDP estimate and warned of a large decline in international capital flows amidst financial market fragility and recession.
The Washington-based lender now forecasts the world economy to shrink 2.9% this year, larger than its earlier prediction of a 1.7% decrease. In a report released on June 11, the lender had predicted the economy to shrink close to 3% in 2009. Global GDP is forecast to rebound with 2% growth next year and 3.2% by 2011.
The dollar surged ahead versus the petro-linked loonie, fighting back to a C$1.1550. The dollar began June at a 7-month low near C$1.0800 but has since stabilized.
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