Dollar at 6-month high on falling commodities

By Kevin Plumberg

HONG KONG (Reuters) - The U.S. dollar rose to a six-month high against the euro on Friday as gold prices tumbled to a 2008 low and oil slipped, leading investors to increase bets on easing inflation and slower global growth.

The euro tumbled below $1.48 to the lowest since February, extending losses after data released on Thursday showed the euro zone economy shrank in the second quarter for the first time since records began being kept in 1995.

Five of the Group of Seven rich nations have experienced economic contraction this year, underscoring the dollar's relative attraction with growth still holding up in the world's largest economy and dragging crude prices back below $114 a barrel.

"A lot of investors who have been buying commodities, not just on a global growth story but as a hedge against a weak dollar, are unloading those commodities based on a much more constrained global outlook and going back into the U.S. dollar," said Tony Morriss, senior currency strategist with ANZ Bank in Sydney.

U.S. light crude futures edged below $114 a barrel, with investors feeling more confident that a ceasefire in hostilities between Russia and Georgia would hold. Since hitting an all-time high of $147.27 a month ago, oil has lost a fifth of its value as deep-seated worries about slowing demand from big consumers like China.

A 1.5 percent decline in gold prices to $793.95 an ounce in the spot market caused a landslide in other metals prices, with silver plunging 8.7 percent, on track for the largest daily decline since March.

"We'll have some people targeting $750, but I think we would need to see a continuation in that dollar strength to give it sufficient momentum to head that way," said Darren Heathcote of Investec Australia in Sydney.

WEAK CURRENCY=WEAK STOCKS?