Dollar Falls to Record Versus Euro

The dollar declined to a record low against the euro on speculation Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson will say credit- market losses are hurting U.S. economic growth.

The currency also weakened to the lowest level in more than a month against the yen and to a 25-year low versus the Australian dollar on concern confidence in the debt of Fannie Mae and Freddie Mac will diminish even after the U.S. government pledged support for the companies. The pound surpassed $2 for the first time since July 1 as inflation accelerated.

The dollar fell 0.5 percent to $1.5979 per euro at 9:06 a.m. in New York, from $1.5908 yesterday, and touched $1.6038, the weakest level since the 15-nation currency's debut in 1999. The U.S. currency dropped 1.3 percent to 104.77 yen, from 106.14 yesterday, and reached 104.55, the lowest since June 9. Japan's currency increased 0.9 percent to 167.40 per euro, from 168.89 yesterday, when it weakened to 169.75, the all-time low.

The U.S. currency has given up all the gains made versus the euro since July 3, when European Central Bank President Jean-Claude Trichet said he has ``no bias'' on future interest- rate moves.

The dollar strengthened 0.6 percent to $1.5706 per euro that week. It has since slumped almost 2 percent on concern Fannie Mae and Freddie Mac, which buy or finance almost half the $12 trillion of U.S. mortgages, would need a government rescue.

The Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, fell for a fifth day on the ICE market, dropping as much as 0.8 percent to 71.320, the lowest level since April 23, from 71.915.

Consumer prices climbed 3.8 percent last month from a year earlier, the highest level since records began in 1997, the Office for National Statistics said in London. The median forecast of 36 analysts surveyed by Bloomberg News was for an increase of 3.6 percent.

Bernanke will give his semiannual testimony on monetary policy and the economy before the Senate Banking Committee at 10 a.m. Washington time. A separate hearing before the committee with Paulson and Securities and Exchange Commission Chairman Christopher Cox on financial markets is scheduled for about 11:30 a.m.

Global banks and securities firms have reported losses and writedowns of more than $400 billion as the subprime-mortgage market collapsed.

U.S. producer prices rose 9.2 percent in the 12 months ended in June, the Labor Department reported in Washington. Retail sales advanced 0.1 percent last month, after a revised 0.8 percent advance in May, the Commerce Department reported.

Dollar Falls to Record Versus Euro, Bloomberg
7/15/2008 6:45:38 AM