Euro, Pound Tumble

The euro fell below $1.28 for the first time since November 2006 and the pound tumbled to a five- year low on speculation Europe's central banks will cut interest rates as the global economy heads for a recession.

The single European currency also slid to the weakest in more than four years versus the yen as global stocks declined, encouraging investors to sell higher-yielding assets and pay back low-cost loans in Japan. The pound dropped to a one-week low versus the euro after Bank of England Governor Mervyn King said the U.K. is probably in a recession.

The euro dropped 1.5 percent to $1.2864 at 3:10 p.m. in New York, from $1.3063 yesterday, after touching $1.2743. It fell 3.7 percent to 126.01 yen from 103.80, after reaching 125.85, the lowest since April 2004.

The British pound fell for a fourth day against the greenback after a report yesterday showed U.K. manufacturing confidence dropped to its weakest level in almost three decades.

Sterling declined 2.2 percent to $1.6334 after touching $1.6139, the lowest since September 2003. It dropped as much as 3.4 percent, the biggest decline since September 1992, when investor George Soros drove the currency out of Europe's system of linked exchange rates. The pound slid for a third day against the euro, weakening 0.8 percent to 78.75 pence.

Emerging-market currencies weakened as Argentina's planned seizure of private pension funds stoked concern the nation faces its second default this decade. The government of President Cristina Fernandez de Kirchner proposed yesterday taking control of 10 funds, including units of HSBC Holdings Plc and Banco Bilbao Vizcaya Argentaria SA.

Russia's ruble fell for a sixth day against the dollar to the lowest level in two years, dropping as much as 1.1 percent to 26.9916. The South Korean won lost 3.1 percent to 1,363.13 per dollar, Brazil's real dropped 5.9 percent to 2.3790, and Mexico's peso declined 3.4 percent to 13.706. Argentina's peso was little changed at 3.2238 per dollar as traders said the central bank sold reserves to shore up the currency.,
10/22/2008 12:30:43 PM