While you were sleeping: US dollar gains, Ford sales plunge

Wednesday 4th March 2009

The US dollar rose to a three-year high against an index of six major currencies as investors flocked to the greenback, seen as a haven in times of uncertainty.

The ICE Futures US Dollar Index, which measures the US currency against the euro, yen, pound, Swiss franc, Canadian dollar, Swedish krona and Canadian dollar, climbed as high as 89.33, the highest since April 2006.

The dollar strengthened after Federal Reserve Chairman Ben Bernanke said the government may need to provide even more aid to the banking system and take other steps to restore stability to financial markets. Policymakers may need to extend support to more than the US$700 billion already pledged, said Bernanke, who have previously warned that recession in the world's biggest economy could extend through until 2010 if markets don't stabilise.

"Without a reasonable degree of financial stability, a sustainable recovery will not occur," Bernanke said in testimony to the Senate Budget Committee. "More needs to be done."

The dollar rose to 98.25 yen from 97.45 and traded at $1.2581 per euro from $1.2578. The yen fell to 123.58 per euro from 122.58.

The prospect of even more aid was echoed by Treasury Secretary Timothy Geithner, who told the House Ways and Means Committee that more work is needed on the scope of the bailout measures.

"As expensive as it already has been, our effort to stabilise the financial system might cost more," Geithner said during an appearance on Obama's budget proposal.

US pending home resales dropped 7.7% in January, twice the pace expected, according to the National Association of Realtors, a sign that the US housing market remains mired in a slump. Home Depot, the home improvement chain, fell 4.2% to US$19.08, making it one of the biggest decliners on the Dow Jones Industrial Average.

Ford Motor fell 3.2% to US$1.82 after the second-largest US automaker posted a 48% slump in sales last month, in step with a broader slide in auto sales.

Sales at General Motors, the auto industry's largest recipient of government aid, fell 53%. Its shares fell 1% to US$1.99. Toyota Motor's sales declined 40%, Honda's dropped 38% and Nissan Motor's declined 37%.

Stocks on Wall Street rose as some investors snapped up shares when benchmark indexes reached a 12-year low. Even President Barack Obama did his bit to lift sentiment, saying now may be a good time to buy shares, on a longer-term view.

Also helping lift stocks, Chinese central bank officials said China's economy will rebound this year, aided by the government's 4 trillion yuan stimulus package.

General Electric fell 7.8% to US$7.01, leading the Dow lower. Coca-Cola Co. declined 2.2% to US$38.83. American Express gained 6.9% to US$11.82, leading gainers on the Dow. Walt Disney climbed 1.9% to US$16.36. Citigroup rose 1.7% to US$1.22.

The Standard & Poor's 500 Index fell 0.6% to 696.33 and the Nasdaq Composite dropped 0.1% to 1321.01.

Crude oil was little changed at about US$40 a barrel after slumping 10% the previous day amid concern the global slowdown will sap demand for fuel.

Crude oil for April delivery rose 34 cents to US$40.49 a barrel on the New York Mercantile Exchange.

Gold had its biggest slide in almost two months as demand for the precious metal as a haven abated. Gold futures for April delivery fell 2.8% to US$913.60 an ounce in New York. Copper rose in London on expectations China will increase purchases of the metal to build a buffer of inventory.

Copper for delivery in three months rose 4% to US$3,520 a ton.

In the UK, Chancellor of the Exchequer Alistair Darling indicated the Bank of England could start printing money to revive economic growth as interest rates run out of headroom to act as a further stimulant.

The central bank "may decide this month that it's appropriate to do so," Darling said in an interview with the Daily Telegraph.

The Bank of England, which has cut its benchmark rate to a record low 1%, has sought permission from the Treasury to create more money to buy securities.

In London, the FTSE 100 Index fell 3% to 3512.09. Lloyds Banking Group fell 7.9% and Barclays fell 6.7%.

Stocks in Europe sank to the lowest level in about three years amid signs of weakening corporate profits. The Dow Jones Stoxx 600 Index fell 1.8% to 161.34. Credit Suisse Group slipped 3.8% after Sanford C. Bernstein & Co. cut the stock to "sell." ING Groep fell 8.4% and Swedbank fell 9.8%.

Germany's DAX 30 fell 0.5% to 3690.72 and France's CAC 40 declined 1% to 2554.55.

By Jonathan Underhill

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