Dollar hits 6-month high

The dollar hit a six-month high against a basket of major currencies on Tuesday, benefiting from weakness in commodities, as investors looked beyond U.S. growth worries to a slowing global economy.
The euro slid to a six-month low against the dollar, while the pound slipped below $1.90 to a 21-month trough, as fears grew that economic malaise in the United States is leading to a broader global slowdown.
The euro has seen a sustained fall since European Central Bank President Jean-Claude Trichet said last week the euro zone economy was slowing more than policymakers had expected.
It has broken a series of key chart levels, convincing some analysts that the dollar may be ending its seven-year slide.
"As long as we see commodity prices moving lower … we still see a downside in euro/dollar medium to long term," said Michael Klawitter, currency strategist at Dresdner Kleinwort in Frankfurt. However he said there was potential for short-term recovery in the euro given technical positioning, and that it should be supported for now at around these levels.
"The move in favour of the dollar over the last week has pretty much come to an end, and with the market being clearly overbought dollar and oversold euro/dollar and so on, I think the risk of technical bounces (for the euro) is significant."
By midday Tuesday, the euro was down at $1.4890 after touching a six-month low of $1.4812, according to Reuters data. The dollar index, which measures the U.S. unit against a basket of six currencies, rose to 76.362, a six-month high. The index has surged more than 4% — on track for its biggest such winning streak in 13 years.
The dollar was steady at 110.13 yen, within striking distance of a seven-month peak of 110.40 hit on EBS the previous day, while the euro was steady at 164. The pound fell to a 21-month trough against the dollar of $1.8970 before recovering slightly to trade at $1.9012, while the dollar was well bid at CHF 1.0900 against the Swiss franc.
The U.S. economy is still ailing with the financial sector reeling from a year-old credit crisis, but analysts say the outlook elsewhere in the world has buoyed its position.
The euro area and Britain have buckled under the twin strains of higher inflation and fading growth.
However there are still risks for the dollar from U.S. data if it comes in much weaker than expected. Tumbling commodity prices hit the high-yielding Australian dollar, which sank to a seven-month low against the U.S. dollar, also weighed by expectations of lower interest rates.
On Monday the Reserve Bank of Australia said the economy seemed to be slowing enough to reduce inflation significantly over time.
Adding to the case for a cut in Australian rates, a key measure of business conditions struck its lowest level in seven years in July as firms reported falling sales and profitability.