Dollar struggles as world seeks to avoid ‘currency war
October 8, 2010

The dollar traded near an eight-month low against the euro on Friday and stock markets slid ahead of key US data and as major powers gathered inWashington to avert a damaging global “currency war.”

With recovery painfully slow, recent weeks have seen nations from Japan toColombia intervene to stop their currencies from rising to levels that would make exports prohibitively expensive, sparking talk of a currency war among key trading nations.

“It is a very real threat, and it will be in focus this weekend at the IMF/World Bank series of meetings in Washington,” said GFT analyst David Morrison.

In London trade, the euro eased to 1.3914 dollars, one day after it had rocketed to 1.4029 dollars — the highest level since late January.

Against the Japanese currency, the dollar stood at 82.34 yen, after tumbling on Thursday to a 15-year low at 82.11.

European stock markets also declined, with investors on tenterhooks ahead of crucial US payrolls figures due at 1230 GMT.

Later on Friday, the world’s top economic powers will gather in Washington and address fears of potentially damaging currency competition amid bleak hopes for a deal between China, the United States and other top nations.

Finance ministers and central bankers from 187 countries will convene for an annual meeting of the International Monetary Fund confronted by warnings that beggar-thy-neighbor policies could wreck the global recovery.

“Given the recent environment of rhetoric about ‘currency wars’, unilateral intervention in foreign exchange markets and the introduction of policies to limit capital flow, there has been a lot of attention focused on what can be expected from this weekend’s meetings,” said Barclays Capital analyst Raghav Subbarao.

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