Below The Beltway

Dollar up:

Aug. 15 (Bloomberg) — The dollar headed for a fifth weekly gain against the euro, its longest winning streak in more than two years, as crude oil prices declined and economies from Germany to Japan contracted.

The U.S. currency rose to the strongest level in almost six months against the euro and a seven-month high versus the yen. The pound dropped for an 11th day against the dollar, the longest run of declines in at least 37 years, on speculation a recession will force the Bank of England to cut interest rates.

“The world is finding the dollar is very, very cheap,” said Steven Englander, a currency strategist at Lehman Brothers Holdings Inc. in New York. “There’s significant revision of growth outlook and monetary policies outside the U.S. Changing global sentiment is bringing down commodity prices, which is helping the dollar.”

Against the euro, the dollar rose 1 percent to $1.4685 at 10:04 a.m. in New York, from $1.4826 yesterday. It earlier touched $1.4678, the strongest level since Feb. 20. The U.S. currency increased 0.6 percent to 110.41 yen, from 109.74. It earlier rose to 110.66, the strongest since Jan. 2. The euro traded at 162.15 yen, compared with 162.68.

The dollar has risen 1.8 percent against the euro this week in its longest stretch of weekly gains since February 2006. The U.S. currency is headed for a 0.3 percent advance versus the yen, its second straight weekly increase. The euro is poised for a fourth weekly decline against the yen, dropping 1.6 percent.

The dollar’s 5.9 percent rally against the euro this month has led banks to raise their forecasts for the U.S. currency.

Oil down:

 NEW YORK (AP) — Wall Street fluctuated Friday as the price of oil extended its decline but a disappointing report on consumer sentiment reminded the market of the economy’s continuing troubles.

Oil fell on a growing sense that economies around the world are joining the U.S. in a slowdown. The rising dollar, which is gaining strength on economic concerns, contributed to the sell-off in crude and also in other commodities.

Light, sweet crude slipped $2.63 to $112.38 a barrel on the New York Mercantile Exchange.

Oil’s continuing slide was welcome news to investors who have been concerned for months that record-high prices for energy — crude topped out at $147.27 a barrel on July 11 — would force consumers to keep cutting back their discretionary spending.

That’s a drop of $ 34.89, or just over 23.6%, in a little more than a month.

As I noted three months ago, the rise in the price of oil that we witnessed during the first half of 2008 was accompanied by a corresponding drop in the value of the dollar against foreign currencies. Now that the dollar seems to be gaining back value, the decline in oil prices makes sense.