NEW YORK, USA

The dollar gained yesterday as worries over slowing growth in Asia and a decline in US consumer confidence raised concerns about the health of the global recovery, driving investors to safety.

The euro, which is used by 16 European countries, dropped to US$1.2185 in New York midday trading Tuesday from US$1.2287 late Monday.

The British pound declined to US$1.5064 from US$1.5110, but the dollar slipped to 88.40 Japanese yen from 89.40 yen. The yen is also considered a safe haven purchase.

The Conference Board, a private research group, said its Consumer Confidence Index fell to 52.9 in June from 62.7 in May, suggesting that US consumers are getting increasingly spooked by stock market volatility and high unemployment. An index level above 90 signals that the economy is healthy.

“Confidence really has taken a hit here this summer,” said currency strategist Michael Woolfolk of Bank of New York Mellon. “Retail sales will be the next shoe to drop here.”

US consumer spending accounts for about 70 per cent of the country’s economic activity. A drop down in spending will weigh on economic growth.

Problems weren’t limited to the US Analysts are worried about euro442 billion in one-year loans coming due Thursday to the European Central Bank, which analysts say will test the capacity of European banks to fund themselves.

The euro has tumbled more than 15 per cent this year as the public debt levels of several of its member countries swelled. The European Union and International Monetary Fund had to kick in an emergency financing package of nearly US$1 trillion to try and reassure investors worried about defaults.

The deep cuts in public spending and slowing economies in Europe have also weighed on the banking sector. Investors are not sure of the extent of the banks’ exposure to sovereign debt.

Currencies of commodity exporters and emerging economies around the world also fell versus the dollar after weak data from Japan and China.

Japanese factory output and household spending dropped in May, while unemployment rose, triggering fears about its economic growth slowing in the second quarter. Japan is the world’s second-biggest economy.

The Conference Board, a private research group, also said that its leading economic index for China rose just 0.3 per cent in April, the smallest gain since November — suggesting that growth could slow.

The index forecasts economic activity for the next three to six months. Investors have been worried about a slowdown in China for months as the government restricts lending.

Demand for raw materials and finished goods from China helped get the economy growing again in 2009.

The dollar gained to 1.0511 Canadian dollars from 1.0344 Canadian dollars.

The US currency was also sharply higher against the Australian and New Zealand dollars. All three, which are big commodity exporters, tend to fall in value when confidence in the economic recovery slides. An economy producing more goods would use more commodities such as oil, gas and metals.

The dollar dropped to 1.0817 Swiss francs from 1.0875 francs, but rose against the Latin American and Scandinavian currencies.

-AP

The greenback was in the ascendency yesterday