Low Dollar Drives Investors To Commodities

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The U.S. dollar is at its lowest level of the year against the Euro, and it's lost ground against other currencies as well. The weakness of the dollar has helped push up the cost of commodities like oil and copper.


Let's report next on international currency markets, where the dollar has been on a steep slide. It's at its lowest level of the year compared with the euro. The falling dollar means the rise of the price of commodities, like oil.

NPR's Jim Zarroli has more.

JIM ZARROLI: When the dollar weakens, investors tend to look for safe havens where their money will hold its value. Yesterday, a lot of traders rushed to put their money in gold. It climbed temporarily over $1,000 an ounce, a level that lasted in February.

George Gero is vice president of RBC Capital Markets.

Mr. GEORGE GERO (Vice President, RBC Capital Markets): This has been a gold rush by people who are afraid to A, miss the boat, or B, have not secured their purchasing power against the dropping dollar.

JIM ZARROLI: At the same time, oil hit about $72 a barrel. The drop in the dollar comes at a time when much of the world is showing signs of an economic rebound. German exports are higher. British manufacturing output has risen. But many investors believe the U.S. economy may lag behind the others.

That means Federal Reserve officials are more likely to keep interest rates low for the foreseeable future, which gives foreign investors less incentive to send money to the United States. That lowers demand for the dollar and weakens it against other currencies. The weak dollar is good for American exporters because their products are cheaper overseas. But it also makes imported goods more expensive, and in the long run, it can lead to higher inflation.

Jim Zarroli, NPR News, New York.

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