Economic indicators suggest deep concern

The Commerce Department said spending on U.S. construction projects dropped 1.7% in January as outlays on private residential projects took another tumble. Economists surveyed by MarketWatch had been looking for a decline of 0.7%. See Economic Report.

U.S. stocks ended a lackluster session narrowly mixed. See Market Snapshot. Crude oil's rise to a new high above $103 a barrel also weighed on the greenback. Crude for April delivery rallied $2.11 to a record $103.95 a barrel on the New York Mercantile Exchange in early morning trading. The nominal level has already passed inflation-adjusted historical highs. See Futures Movers.

Gold futures also surged to new highs Monday. See Metals Stocks.

Crude oil and gold are both traded in dollars, so their prices usually move inversely to the dollar. As the dollar declines in value, so does the price of these commodities in non-dollar terms, making them more appealing to speculators. The euro was trading at $1.5192, up 0.2%, after earlier rising as high as $1.5272, its highest level since the European unit began trading in January 1999. See real-time currency prices.

BAD NEWS FOR THE DOLLARS: The dollar index, which measures the greenback against a basket of six major currencies, was at 73.730, compared with 73.754 in late U.S. trading Friday.

The British pound sterling was at $1.9825, down about 0.1% after earlier rising to $1.9935.

The dollar bought 103.51 yen, down 0.2%. Earlier Monday, the dollar fell to 102.59 yen, its lowest level against its Japanese counterpart since February 2005.

The Swiss franc was trading at $1.0426 against the dollar, which was up 0.1%. Earlier, the dollar traded at a new record low of $1.0305 against the Swiss unit.

Combined with underlying ideas the U.S. economy may already be in recession and expectations the U.S. Federal Reserve will continue aggressively cutting interest rates, the stage was set for further gains against the dollar by major currencies, analysts said.

Philadelphia Fed Bank President Charles Plosser said Monday that the level of the Fed's benchmark interest rates is lower than standard monetary policy rules call for and therefore must be transitory and reversed in due course or inflation expectations may become unmoored. Plosser, who is a voting member of the Fed's policy making committee this year, said that the turmoil in financial markets is a good reason why policy is lower than implied by policy rules.

Japanese stocks were hit hard as the yen rose. The stronger currency put pressure on Japanese exporters, analysts said. Tokyo's benchmark Nikkei 225 Average dropped 4.5%. See Asia Markets.


Gold futures closed with strong gains Monday, after rallying to a record price.