Dollar loses value in wake of Katrina

| September 2, 2005 | 0 Comments
Dollar loses value in wake of Katrina

The US dollar hit its lowest level since May against a number of European currencies this week as the fallout from Hurricane Katrina continued to grow.

An especial worry was rising gasoline prices after the storm shut down 10 percent of refining capacity in the United States and it was said that gasoline prices could rise to $3.50 per gallon for regular unleaded, and on the possible impact of such prices hikes on the growth of the US economy.

Another factor in the dollar’s weakness was the possibility that interest rates, the rise of which have been instrumental in the dollar’s rally this year and which were expected to rise twice more before the end of the year, are now widely expected to rise only once more before the beginning of 2006.

A series of other economic reports released during the week which indicated that the US economy was feeling pressured even before Katrina hit on Monday did not help the dollar’s outlook.

The US dollar lost 2.3 percent during the week to Sfr1.2290 in relation to the Swiss franc, traditionally seen as a safe investment in times of crisis.

The greenback was also down by 2.1 percent over the week against sterling, to $1.8398 and fell 2 percent to $1.2537 in relation to the euro.

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