Dollar up on oil slide

Against a pile of major currencies, the dollar hit an eight-month high on Tuesday. It got a boost from a sharp decline in oil prices due to forecast that Hurricane Gustav’s damage to U.S energy facilities may be less than expected.

Sterling and Euro fell after European Union leaders agreed to postpone the EU-Russia partnership last Monday. The leaders decided to postpone the talks until Moscow can withdraw its troops in Georgia, traders said.

Investors’ unwinded bets that major economies would withstand US slowdown and global credit crunch as European currencies are also experiencing global economic slowdown.

"EU vs. Russia political tensions are adding to the weakness of European currencies," said Shuichi Kanehira, a senior trader at Mizuho Corporate Bank.

Yen dipped from surprise PM’s resignation

A weekend comment by Britain's finance minister that economic challenges are the greatest in 60 years -- with some media reporting him as saying the British economy was about to go into its worst downturn since World War 2 -- sparked a sell-off in the pound, driving it to a two-year low against the dollar and a all-time low against the euro.

The market showed little follow-through reaction to the surprise resignation of Japan's Prime Minister Yasuo Fukuda on Monday, the second leader to step down in less than a year. The yen initially dipped on the news.

"Fukuda's resignation itself was not a decisive factor. It is his successor the market is interested in, and a wait-and-see mood is likely to prevail until the details are hammered out," said a trader at a European bank.

"The dollar is up on oil, but the yen can hold out against the dollar as other currencies are in retreat," the trader said.