Dollar Slumps after Weak Data


The dollar slumped for a second straight session on Wednesday after an unexpected fall in U.S. durable goods orders bolstered worries about the health of the economy, which could prompt further interest rate cuts.

The durables goods report contrasted with European data on Wednesday that suggested the euro-zone economy was much healthier than that of the United States despite a soaring euro and higher interest rates.

New orders for long-lasting U.S. goods declined 1.7 percent last month and a key measure of companies' appetite for investment also contracted, according to data from the Commerce Department.

The report boosted the perceived chances of further Federal Reserve easing at its next monetary policy meeting, despite the U.S. central bank cutting rates by 325 basis points since September. Rate futures were pricing in a 40 percent chance of a half-percentage point rate reduction to 1.75 percent.

The euro rose 0.6 percent against the dollar to $1.5726, less than 2 cents away from its record high at $1.5905 hit last week. Against the yen, the dollar fell 1.0 percent to 99.100 yen.

The euro got a boost after the headline German business sentiment Ifo index rose to its strongest reading since August, while euro-zone industrial new orders also turned out much stronger than expected in January. In addition, French business sentiment reached its highest level this year in March.


TradingEconomics.com, Bloomberg
3/26/2008 6:46:59 AM