A dollar meltdown? Not today

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

The dollar is having a tough day, but this isn’t a meltdown -- despite what the hot action in the gold market might suggest.

The DXY index, which measures the dollar’s value against six other key currencies (euro, yen, British pound, Canadian dollar, Swedish krona and Swiss franc) was at 76.32 at about 1:15 p.m. PDT -- a decline of just 0.4% from Monday’s level of 76.64.

The index fell as low as 76.10 today, but even that was above the recent low of 75.83 on Sept. 23. And there’s still quite a bit of breathing room above the decade low of 71.33 reached in April 2008.

The euro has risen to $1.472, a modest gain of 0.4% from $1.466 on Monday.

The wild move today in gold, up $21.90 to a record $1,038.60 an ounce, hinted at a bigger hit to the dollar. Gold often plays the roll of the anti-dollar.

But the greenback’s decline ‘has been very orderly -- it’s nothing to alarm policymakers’ in Washington or overseas, said Dan Katzive, a currency strategist at Credit Suisse in New York.

The world can live with an eroding dollar, as it has for most of this decade. But no one wants a sudden collapse.

One catalyst for today’s decline in the buck was a fresh rumor that Middle Eastern oil exporters want to move away from pricing crude in dollars on the world market, to escape the penalty they face from a weaker U.S. currency.

But that rumor has been around for a long time, and it still isn’t clear to anyone how that might actually happen.

‘I don’t attach a lot of credibility to it,’ said Brian Dolan, currency strategist at Gain Capital in Bedminster, N.J.

The biggest reason for the dollar’s renewed weakness may just be greater optimism that the global economy is coming out of its funk, as reflected in the Australian central bank’s decision to raise its benchmark short-term interest rate.

That highlights the gulf between near-zero U.S. rates and rates in the rest of the world, and pushes more money toward the countries with higher rates.

Investors betting on a recovery drove U.S. stocks sharply higher today -- the Dow industrials closed up 131.50 points, or 1.4%, to 9,731.25 -- but also poured money into many foreign stock markets, which automatically benefits other currencies at the dollar’s expense.

-- Tom Petruno