By Rafael Nam
HONG KONG, Feb 27 (Reuters) - The dollar sank to a record
low against the euro on Wednesday, breaking the psychologically
important $1.50 level, while Asian stocks rose for a third
straight session as a $15 billion share buyback plan by IBM
boosted investor confidence.
The dollar hit an all-time low against a basket of
currencies a day after U.S. consumer sentiment was reported to
have sunk to a five-year low, offering more proof that the
world's largest economy is struggling.
The report, along with recent weak retail sales and
manufacturing data, has reinforced expectations that the U.S.
Federal Reserve will have to cut interest rates further,
pressuring the dollar.
The slumping greenback sparked a further rally in
commodities and metals. Oil remained above $101 a barrel -- a
level it broke for the first time on Tuesday -- while gold
surged to a record high, driven as well by a search for a hedge
against inflation.
In early Asian trade, the euro <EUR=> surged as high as
$1.5050 on electric platform EBS, its highest level since the
single currency was introduced in 1999. By 0150 GMT it had
pulled back slightly to $1.4992.
"We've just gone through a major psychological level, so
the market is considering where the euro's next ceiling will
be," said Hideaki Inoue, a forex manager at Mitsubishi UFJ
Trust and Banking in Tokyo.
Broad weakness in the U.S. currency pushed the dollar index
<.DXY> to a record low 74.509, but the dollar was little
changed against the yen at 107.30 yen <JPY=>.
Federal Reserve Vice Chairman Donald Kohn said on Tuesday
that a weak U.S. economy was a bigger worry than higher
inflation risks, suggesting a willingness to cut the federal
funds rate as the central bank tackles "difficult times".
Reports on Tuesday showed U.S. producer price inflation in
January surged to its highest in more than 26 years, sparking
fears of stagflation -- when prices continue to rise despite
cooling economy growth. []
For clues into the Fed's outlook on rates, investors were
awaiting testimony from Fed Chairman Ben Bernanke later in the
day to the House of Representatives Financial Services
Committee.
Asian stock markets largely ignored the grim U.S. economic
data, focusing instead on the IBM buyback plan and signs of
easing credit worries.
Financial shares posted some of the biggest gains on
growing confidence about the stability of U.S. bond insurers
after Moody's confirmed its credit rating on MBIA Inc, while
higher oil prices boosted the energy sector.
The market has worried that downgrades of bond insurers
could force them to sell off the debt they have guaranteed,
potentially leading to further writedowns in the global
financial sector and worsening a global credit squeeze.
The MSCI's index of Asian stocks outside Japan
<.MIAPJ0000PUS> rose 1.2 percent by 0200 GMT, after having
climbed 2 percent over the previous two sessions. Hong Kong
rose 2 percent, while South Korea addded 0.7 percent.
Japan's Nikkei index <> rose 1.4 percent, with Mizuho
Financial Group leading financials with a gain of 3 percent.
Technology shares such as LG Electronics Inc <066570.KS>
and Sony Corp <6758.T> were also among the day's leaders,
buoyed by the IMB announcement. Its $15 billion share buyback
plan is equivalent to 10 percent of its market capitalisation.
Also on Tuesday, Hewlett-Packard's <HPQ.N> chief executive
Mark Hurd said the computer and printer maker "feels good"
about the quarterly guidance it had provided last week, which
were above Wall Street expectations, citing strong growth
outside the United States. []
OIL, GOLD AT RECORDS
Oil extended its rally, benefitting from the slumping
dollar. Analysts also cited growing fuel demand and
expectations that the OPEC cartel will not increase production
at its meeting in early March as other key factors.
U.S. crude futures <CLc1> rose 33 cents to $101.20 a
barrel, not far off a record $101.43 hit in U.S. trade on
Tuesday.
The weakening dollar also sparked a rally in commodities
and metals. Gold <XAU=> roared to a historic high of $955.70 an
ounce, well above the $946.60/947.40 seen in late U.S. trade.
Bullion prices have risen more than 14 percent so far this
year.
Silver spot prices <XAG=> rose to $18.97/19.02 from
$18.65/18.70 late in New York on Tuesday, trading at its
highest levels since December 1980, while palladium <XPD=> hit
a 6-
