Euro Slides

The euro dropped against the dollar and the yen after the European Central Bank cut its benchmark interest rate to the lowest level in almost two years and investors bet a looming recession will spur more reductions.

Europe's common currency fell as policy makers cut the key rate by half a percentage point to 3.25 percent, the lowest level since December 2006. The Bank of England unexpectedly cut its benchmark rate by 1.5 percentage points to 3 percent today.

The euro fell to $1.2806 as of 12:46 p.m. in London, from $1.2954 yesterday. The single currency has weakened about 19 percent against the dollar since climbing to a record of $1.6038 on July 15. It was at 125.54 yen, from 126.89.

A government report today showed manufacturing orders in Germany, the euro region's biggest economy, dropped by a record 8 percent in September, led by a slump in foreign demand for factory machinery. The European Commission on Nov. 3 said the region may be in a recession and said the economy will stagnate next year.

The euro-region economy contracted 0.3 percent in the three months through September and may shrink by the same amount in the fourth quarter, according to a Bloomberg News survey.

The yen and the dollar in October posted their largest monthly gains versus the euro since the 15-nation currency's debut in 1999 as signs of a global recession led investors to seek safety in the Japanese and U.S. currencies.,
11/6/2008 5:07:28 AM