Dollar Declines to Weakest Level Since Before Lehman Bankruptcy

Oct. 13 (Bloomberg) -- The dollar declined to the weakest level against the euro since before the bankruptcy of Lehman Brothers Holdings Inc., unwinding gains posted when the plunge in global financial markets spurred demand for safety.

Brazil’s real and Norway’s krone rose on speculation carry- trade investors bought higher-yielding assets at the expense of the greenback. The dollar’s decline helped push gold to a record high and oil above $74 a barrel for the first time since August. The pound fell to a six-month low against the euro on bets the Bank of England’s asset-purchase program will expand.

“Carry is king, and the dollar seems to be the currency choice for carry,” said Warren Hyland, a money manager in London at Schroder Investment Management Ltd., which oversees about $200 billion in assets.

The U.S. currency depreciated 0.4 percent to $1.4825 per euro at 11:01 a.m. in New York, from $1.4773 yesterday, after trading at $1.4876, the weakest level since Aug. 22, 2008. The euro was little changed at 132.81 yen. The dollar decreased 0.2 percent to 89.67 yen, from 89.82.

The dollar’s decline versus the euro accelerated after earlier breaching $1.4850, a level last touched a week after Lehman collapsed on Sept. 15, 2008. The dollar reached an 18- month high of $1.2330 on Oct. 28, 2008, as investors bought Treasury bills to weather the worst financial crisis since the Great Depression. The dollar lost 17 percent since then.

One central bank bought “a lot of euros” today, said Scott Ainsbury, who helps manage about $9 billion in currencies at FX Concepts Inc. in New York, adding that “the weak dollar trend” will be extended. More