US Dollar gains on oil, stocks rebound; pound hits 7-year low

New York (Feb 22)  The dollar rose to a three-week high on Monday, bolstered by gains in oil and stocks as well as losses in sterling and euro amid worries about Britain's possible exit from the European Union.

Sterling was the biggest decliner on the day, sliding to a seven-year trough of $1.4057 as concerns grew about the possibility of a British exit from the EU. The pound's losses spilled over to other European currencies, such as the euro and Swiss franc.

"Some of this has to do with uncertainty with Britain, but it also has to do with people thinking there could be more tightening of rates and as a consequence, the dollar has firmed here," said Stan Shipley, foreign exchange strategist at Evercore ISI in New York.

The British pound last changed hands at $1.4145, down 1.8 percent, while the euro rose 0.9 percent to 77.90 pence. The UK currency came under pressure after popular London Mayor Boris Johnson said he would campaign to leave the EU ahead of a June 23 referendum.

"If you have right-wing political parties across Europe polling strongly, and suggesting that they will be closing borders and trying to essentially replicate what the UK has done, then the path for euro/sterling will be very uncertain," said Barclays currency strategist Nikolaos Sgouropoulos in London.

The dollar index rose 0.95 percent to 97.50, after earlier rising to 97.600, its highest since Feb. 3.

The risk-on mood across markets also weighed on the euro, which has tended to be negatively correlated with risk appetite in recent months. The euro fell to a three-week low of $1.1004 and was on track for its biggest one-day fall in a week.

"People had thought two weeks ago that somehow the G20 would bring down the dollar, but that's not a realistic possibility, so they are comfortable jumping back into their positions," said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.

The dollar hit its highest against the Swiss franc in three weeks and was last up 0.8 percent at 0.9973 franc, while the euro hit an almost-three-year low against the yen, last trading down 0.5 percent at 124.73 yen.

The yen has been the chief beneficiary on currency markets during the worst start of a year for stocks since 2009. The dollar last traded up 0.38 percent at 113.04 yen.

Source: CNBC