Dollar Drops as Oil Prices Surge to Record on Hurricane Concern

The dollar fell against the euro in Europe on speculation a surge in the price of oil to more than $70 a barrel will further erode U.S. consumer confidence.

The U.S. currency extended last week’s 1.1 percent drop as Hurricane Katrina disrupted oil production in the Gulf of Mexico, adding to concern rising gasoline prices will make consumers more reluctant to spend. Storm damage may be the most costly to insurers yet, according to a forecaster. The Conference Board will probably say tomorrow its index of sentiment dropped to a four- month low in August.

…“The oil price is going to be very negative for the U.S.,” said Luke Waddington, head of interbank currency sales in Tokyo at the Royal Bank of Scotland Plc. “The economic impact of the hurricane is increasing pressure on the dollar.”

…Higher oil prices are “really putting quite a lot of pressure on the dollar,” said Sharada Selvanathan, a currency strategist in Singapore at BNP Paribas SA. “Japan does import most of its oil but it is one of the most efficient energy consumers.”

Bloomberg