Economy worries boost dollar and hit commodities

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - Worries about a slowing global economy pushed the dollar to six-month highs against the euro and other major currencies on Tuesday, and prompted more selling of key commodities such as gold and oil.

Shares were down globally. UBS (UBSN.VX) bank reported worse-than-expected losses as a result of the credit crisis.

The dollar index .DXY, which tracks the U.S. currency against a basket of counterparts, rose to 76.616, its highest level since February and the eighth straight trading day of gains.

The euro EUR= sank to a six-month low against the dollar and was trading around $1.4877. Britain's pound slid to a 21-month trough just above $1.90.

Investors have been unwinding currency trades against the dollar, boosting the greenback as evidence grows that the world economy is slowing fast and perhaps may be doing so more than expected.

"The deteriorating economic outlook for the euro zone and elsewhere is now having an impact after the market had become used to weakness in the U.S. economy," said Kosuke Hanao, head of forex sales at HSBC in Tokyo.

The same pressures have been weakening once high-flying commodities, which often move in contrary directions to the dollar as an inflation hedge.

Oil fell around $1 a barrel despite concerns over supply disruptions stemming from the Russia-Georgia clash.