The dollar edged down on Thursday, slipping from an eight-month high against a basket of currencies as investors booked profits on the U.S. currency’s surge this month.

Persistent worries that a bailout of two U.S. mortgage finance giants Fannie Mae <FNM.N> and Freddie Mac <FRE.N> could pose further risks to an already battered financial system also made investors careful about picking up the dollar.

The dollar has soared this month as investors unwound massive long positions in the euro, higher-yielding currencies as well as gold and oil that they had taken earlier on bets that the global economy would withstand the U.S. downturn and credit crisis.

“Oil is almost the solo driver in the foreign exchange market at the moment,” said Minoru Shioiri, senior manager of forex trading at Mitsubishi UFJ Securities.

U.S. crude futures <CLc1> rose above $116 a barrel, extending overnight gains made after Russia responded angrily to a U.S. missile shield agreement with Poland, raising the threat of a supply disruption from the huge energy producer. [O/R]

Losses in the dollar were limited on Thursday, however, as views that slowing global growth would prompt central banks outside the United States, such as the European Central Bank and the Bank of England to lower interest rates.

The Federal Reserve is seen raising interest rates next year to fight inflation.

The dollar index, which measures the dollar’s value against a basket of six currencies, slipped 0.2 percent to 76.772 <.DXY>. It struck its highest level this year at 77.413 on Tuesday.

The euro firmed 0.2 percent to $1.4778 <EUR=>, staying above a six-month low of $1.4630 hit on Tuesday but 8 percent below a record peak of $1.6040 hit a little over a month ago.

The dollar dipped 0.2 percent to 109.67 yen <JPY=>, having retreated from a seven-month high of 110.67 yen hit last week.

The euro edged up 0.1 percent against the Japanese yen to 162.14 <EURJPY=R>.

Source: http://www.afxnews.com

Related Content