Widespread concern about the outlook for the U.S. economy pushed the euro to a new record and the yen to 12-year highs against the U.S. dollar Thursday, while gold and oil prices also surged.
The euro pushed to an all-time high of $1.5625 in European trading, beating a day-old record of $1.5559 — before declining to $1.5574 in afternoon trading following a report that showed U.S. retail sales fell in February. That was still above the $1.5526 it bought in New York Wednesday.
The dollar dropped below 100 Japanese yen for the first time since November 1995. It traded as low as 99.75 yen before recovering some ground to 100.57 yen, compared with Wednesday’s level of 102.04 yen.
Japanese leaders quickly cautioned against instability in currency markets, but made no mention of any intervention to stem the dollar’s slide.
The yen’s strength is bad news for Japan’s economy, which has been showing signs of weakening, because it makes exporters’ products more expensive abroad and erodes the value of their overseas earnings.
“Exports will suffer, and that’s not good for Japan’s economic growth,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo.
The British pound rose to $2.0305 compared to $2.0243 on Wednesday night.
Analysts said the dollar may remain weak amid continued financial market jitters.
The likely liquidation of Carlyle Capital Corp.’s remaining assets sent the fund’s shares plummeting more than 90 percent Thursday and rattled stock markets around the globe. It was also a high-profile setback for private equity fund Carlyle Group.
Carlyle Capital said late Wednesday that it expected creditors to seize all of the fund’s remaining assets — investment-grade mortgage-backed securities — after unsuccessful negotiations to prevent its liquidation.
“The latest blow to the dollar and world bourses intensified in early European trade when Carlyle Capital Corp. said ... it expected creditors to seize all of the fund’s remaining assets after unsuccessful negotiations to prevent its liquidation,” said Ashraf Laidi, chief foreign exchange strategist for CMC Markets in New York.
“The continued damage in the mortgage-backed securities market dealt a blow to Carlyle’s collateral, all of which was AAA rated.”
That caused a wide sell-off on markets from Tokyo to London and prompted currency traders to sell their dollars.
The euro’s rush also pushed oil higher, with prices rising to new trading highs above $110 a barrel on Thursday. The commodity is priced in dollars.
Meanwhile, April gold futures touched $1,000 an ounce in trading.
The dark economic outlook has raised expectations that the U.S. Federal Reserve will continue to cut interest rates — even as the European Central Bank sticks to a tough anti-inflation stance and signals that no rate cuts are on the way for the 15-nation euro zone from its current 4 percent level.
Lower interest rates can jump-start a nation’s economy, but can also weigh on its currency as traders transfer funds to countries where they can earn higher returns.
ECB president Jean-Claude Trichet reiterated his concern about roiled foreign exchange markets, telling the French newspaper Le Point that “especially with the dollar, I reaffirm that the disorderly movements of exchange rates are undesirable from the point of view of economic growth.”