and Bloomberg News
The dollar powered higher against the world's three other major currencies Monday as the slowed U.S. economy still looks better than the alternatives to many global investors.
The dollar hit a six-month high against the euro and a 16-year high against the British pound before profit-taking set in.
Meanwhile, early in New York trading the yen suffered its biggest drop in six weeks against the dollar as a report showing the Japanese economy unexpectedly shrank in the first quarter raised concern that the nation is entering a recession. Traders pushed the dollar back down later in the day.
The dollar's recent surge against the euro has deepened U.S. investors' losses in European stocks while giving U.S. tourists in Europe this summer a bonus.
At the same time, the strong dollar hurts U.S. companies by making their exports more expensive overseas and by making imported goods cheaper for American buyers.
In New York on Monday, it took as little as 84.1 U.S. cents to buy a euro, down from 85.1 cents Friday and the lowest since November. By the close of trading, the euro rebounded to Friday's levels.
Also on Monday, it took as little as $1.372 to buy a British pound, the cheapest the pound has been in 16 years.
The euro's value has faded amid fresh data showing the German and French economies are decelerating. A report last week showed business confidence in the 12-nation euro area fell to a 20-month low in May.
Although the U.S. economy also has decelerated, the dollar's strength suggests global investors continue to favor U.S. assets over European assets amid the slowdown. A currency's value typically reflects the relative flow of capital into or out of assets denominated in the currency.
The pound has plummeted since Prime Minister Tony Blair's landslide victory in British elections last week. Blair is expected to accelerate a referendum on Britain's adoption of the euro.
The yen's latest weakness follows the country's report that its economy contracted in the first quarter. Investors fear that the report will erode support for new Prime Minister Junichiro Koizumi's policies to stimulate growth because his plans might cause more short-term economic hardship.
"A lot of people invested money in Japan expecting Koizumi to come through with reforms, and now it's going to get harder for him to do anything of that sort" so they will sell yen and yen-denominated financial assets, said Andrew Busch, a currency trader at Bank of Montreal in Chicago.
One dollar bought as many as 122.05 yen Monday, up from 120.69 on Friday. The yen then rallied to close unchanged from Friday.
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Europe on Sale
The latest slide in the value of the euro currency against the dollar means U.S. tourists get about 13% more for their dollar than a year ago. Shown here are local currency values for key euro nations per dollar, as well as the British pound's value.
Local currency per dollar:
Country/currency Year ago Monday Austria/schilling 14.44 16.31 Belgium/franc 41.99 47.41 Britain/pound 0.66 0.73 France/franc 6.83 7.71 Germany/mark 2.04 2.29 Ireland/punt 0.83 0.93 Italy/lira 2,015 2,276 Netherlands/guilder 2.30 2.59 Portugal/escudo 210.38 237.64 Spain/peseta 174.60 197.22 Euro 1.04 1.17
Note: Local currencies are still in use in euro nations. Their values are fixed against the euro. Rates shown here are for large bank transactions.
Sources: Associated Press, Times research