Dow climbs to new high for 2009

The Dow Jones industrial average stormed to its highest level in more than a year Monday as a falling dollar boosted prices for gold, oil and other commodities. Stocks also jumped as investors grew more confident that governments around the world will keep interest rates low to help the global economy.

Energy and materials stocks led the market. The major indexes rose 2 percent and the Dow jumped 200 points for the second time in three days, reaching its highest level in 13 months.

News that the Group of 20 countries will keep economic stimulus measures in place signaled to investors that rates will remain low. With U.S. rates near zero, the G-20 news lessened demand for the dollar.

Even as investors are waiting for more signs that the economy is recovering, they've been focusing on the dollar when they make buy and sell decisions. Investors around the world see the dollar as weaker than other currencies, and so they're using it for what's known as "carry trade," to finance purchases of investments in other countries. That trend takes the dollar down further when those purchases are made.

But some analysts are questioning investors' stock moves given the still-weak economy, and warn that stocks and other investments could suffer big losses if the dollar were to turn higher.

"It feels like it's on fumes," said Sean Simko, head of fixed income management at SEI Investments in Oaks, Pennsylvania, referring to the market's advance. "Although fundamentals are catching up, they're not caught up."

He said the dollar's drop and the current surge in stocks and commodities are making it hard for investors to get a clear picture of how fast the economy is rebounding.

Still, many investors like a weaker dollar because it helps U.S. exporters by making their goods cheaper to overseas buyers and giving the companies a boost when they convert profits from abroad to dollars.

The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, fell to its lowest level in 15 months. The dollar rose last year and early this year but the index has been sliding for the past eight months since major stock indicators bounced off 12-year lows.

Although investors have based most of their decisions on the economy, they've also been funneling money into stocks when the dollar weakens and pulling it out when the greenback rises.

Commodities prices, meanwhile, tend to rise when the dollar is down, so gold topped $1,100 an ounce. Crude oil rose $2 to settle at $79.43 per barrel on the New York Mercantile Exchange, helped in part by Tropical Storm Ida, which threatened the Gulf of Mexico.