Dollar gains as US earnings temper recovery hopes

NEW YORK — Dollar momentum continued Friday as more disappointing earnings signaled to investors that the economic recovery will likely be muted.

The 16-nation euro dropped to $1.4899 in late New York trading from $1.4931 Thursday, while the dollar edged up to 90.85 Japanese yen from 90.65 yen. The British pound, meanwhile, gained to $1.6353 from $1.6268.

Also on Friday, the government said that foreigners continued to buy long-term U.S. financial assets in August, although China, the No. 1 holder of U.S. Treasurys, cut its holdings of government debt.

Demand for U.S. assets is important for dollar demand, because foreigners must buy greenbacks in order to purchase American assets. Another concern is that some economists worry that if foreign institutions don’t keep buying U.S. debt, funding our budget deficits, interest rates could rise amid inflation. Inflation eats away at the purchasing power of a currency.

China, meanwhile, alongside several other emerging countries, has been pushing for an alternative to the dollar as a reserve asset as it diversifies its holdings. A falling dollar means its reserves are not worth as much.

Recent figures from the International Monetary Fund showed that the dollar’s share of total reserves has fallen to its lowest level since 1995.

On Friday, both General Electric Co. and Bank of America Corp. showed credit weakness as businesses and consumers struggle with debt. BofA said loan losses were nearly $10 billion.

That’s a bad sign for the economy, weighing on stocks. The Dow Jones industrial average dropped 1.1 percent in morning trading. But it’s good for the dollar, which continues to trade inversely to equities as investors seek out “safe” investments.

In other late New York trading, the dollar rose to 1.0381 Canadian dollars from 1.0331 Thursday, and gained to 1.0179 Swiss francs from 1.0155 francs.