Dollar gains on fresh evidence of economic woes

The dollar rose against most other major currencies Wednesday as weak reports on housing, employment and manufacturing added to worries about the economy. The 15-nation euro dropped to $1.2899 from $1.3022 late Tuesday, while the
British pound fell to $1.5350 from $1.5440. The dollar edged up to 95.73 Japanese yen from 95.65 yen. The Labor Department said new claims for jobless benefits fell to 529,000 last week from a 16-year high of 543,000 the previous week. The four-week
average for initial claims, however, rose to 518,000, its highest point since
January 1983. Meanwhile, the Commerce Department said consumer spending fell by 1 percent in October. Spending by consumers makes up two-thirds of the country's economic activity, and the monthly decline was the biggest since 2001. The government also released grim reports on housing and manufacturing. Sales of new homes plunged 5.3 percent in October to their lowest point in nearly 18 years, while the median price of a home fell to 2004 lows. Factory orders for durable goods dropped 6.2 percent in October, with heavy declines in auto and airplane demand. Stocks started lower after three days of gains before recovering as President-elect Barack Obama named former Federal Reserve Chairman Paul Volcker as a senior adviser and hammered home his message that help is coming for the economy. The Dow Jones industrials rose nearly 250 points Wednesday to cap the index's first four-day advance since last spring.

"The dollar is coming off lows," said Meg Browne, senior currency strategist
at Brown Brothers Harriman in New York. "There's been some shift in trading,
(but) it doesn't mean that this period of consolidation for the dollar is over.
There's risk for the dollar weakening further next week." The dollar was also helped, she said, by investors' relief over policy responses from government officials in the U.S. and abroad. On Tuesday, the Fed said it would spend $800 billion to help bolster the consumer lending and mortgage markets. On Wednesday, the European Commission
called on the 27 European Union governments to spend 200 billion euros ($257 billion) over two years to prompt economic recovery. In other New York trading, the dollar gained to 1.2035 Swiss francs from 1.1878 late Tuesday, but slipped to 1.2271 Canadian dollars from 1.2282.