Dollar rise hits oil, gold; euro sags on ECB cut bets

Mon May 13, 2013 6:16am EDT
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By Marc Jones

LONDON (Reuters) - The dollar continued to power higher on Monday, leaving oil and gold prices in its wake, after the Group of Seven gave a green light to Japan's efforts to spur growth with aggressive monetary easing.

Comments from Italy's central bank governor that the ECB could push one of its key interest rates below zero also put pressure on the euro and lifted benchmark German Bunds as investors started to think about more profitable options.

The dollar .DXY has risen 5 percent against a basket of top currencies since February and its strength looked unlikely to wane after top officials at a G7 meeting in the English countryside showed little concern about the yen's ongoing slump.

The greenback had hit a new 4-1/2 year high of 102.15 yen in Asian trading and but dipped back to 101.69 yen and $1.2964 against the euro by 0915 GMT as traders locked in some of the recent gains.

"Yen selling will have been encouraged by the outcome from the G7 meeting where officials reiterated that they will tolerate yen weakness as long as it results from the use of domestic instruments to stimulate the Japanese economy," said Bank of Toyko-Mitsubishi currency analyst Lee Hardman.

The dollar's strong performance also had a broad impact on commodity markets where raw materials are mainly priced in the currency and therefore its rise effectively makes them cheaper.

Brent oil prices slipped back below $103 a barrel <O/R>, while spot gold fell as much as 1.5 percent to a low of $1,426.40. <GOL/>

London copper climbed, however, after China's April factory data fell short of expectations and raised hopes monetary authorities in the world's biggest metals consumer may embark on further easing, underpinning demand.   Continued...

Passers-by are reflected on a stock quotation board at a brokerage in Tokyo May 13, 2013. REUTERS/Issei Kato