Dollar Declines From Highest Level Against Euro

The dollar fell from near a two-week high against the euro on speculation the U.S. economy will enter a recession regardless of whether Congress approves the Bush administration's $700 billion bank-bailout proposals.

The euro rebounded after posting its biggest drop in seven years against the U.S. currency yesterday as Senate Democrats and Republicans agreed to vote today on the rescue plan. The British pound declined against the euro after a report showed U.K. manufacturing contracted at its fastest pace in 16 years.

The U.S. currency weakened to $1.4151 per euro at 6:41 a.m. in New York, from $1.4092 yesterday. It surged 2.4 percent yesterday, the most since January 2001, and reached a high of $1.4009. The dollar was also at 106.08 yen from 106.11.

The euro's gains came a day before a meeting of the European Central Bank at which policy makers led by Jean-Claude Trichet will probably keep interest rates at 4.25 percent.

The pound declined versus the euro today after a report showed the Chartered Institute of Purchasing and Supply's index of manufacturing fell to 41 in September, from 45.1 in August, the lowest since January 1992. The reading has held below 50, signaling contraction, for five months. The U.K. currency was at 79.33 pence per euro, from 79.13 pence.

The yen fell against all 16 most actively traded currencies after the Bank of Japan's quarterly Tankan survey showed large manufacturers turned pessimistic about their prospects in September for the first time in five years. The Japanese currency weakened to 150.24 per euro, from 149.56 yesterday.

The franc, which has gained 4.6 percent against the euro this year, fell to as low as 1.5813 after Swiss manufacturing contracted for the first time in more than three years in September.

The Australian and New Zealand dollars fell to the lowest in more than a week on speculation their central banks will cut interest rates to combat slowing economic growth. The Australian dollar fell 1.1 percent to 79.73 U.S. cents as of 4:50 p.m. in Sydney. New Zealand's dollar weakened to 66.42 U.S. cents, the lowest since Sept. 18, before trading at 67.33 U.S. cents from 67.59 cents late in Asia yesterday.

Russia's ruble snapped a four-day drop against the dollar after the U.S. Senate agreed to vote on a $700 billion rescue package. The managed currency strengthened to 25.5972 per dollar by 10:27 a.m. in Moscow, from 25.6439 yesterday, when it declined 1.3 percent.

India's rupee fell to a five-year low on speculation companies increased purchases of dollars needed to meet import costs. The rupee fell as much as 0.5 percent to 47.23 per dollar, the lowest since May 2003, before trading at 47.0925 as of 10:22 a.m. in Mumbai. The rupee fell 9.2 percent in the three months through September, its third quarterly loss and its biggest since March 1992.,
10/1/2008 5:29:24 AM