Dollar Tumbles to Record Low Against Euro


The U.S. dollar headed for a weekly decline against the euro and the yen on speculation U.S. credit- market losses will prompt the Federal Reserve to keep lowering interest rates.

The dollar traded near a record low versus the euro after banks including Merrill Lynch & Co. and Citigroup Inc. said the Fed will cut its benchmark rate by at least 1 percentage point.

Analysts said the dollar’s decline was also exacerbated by poor liquidity due to public holidays in the US and Japan. Helping the dollar’s decline was a report from the Organisation for Economic Co-operation and Development, which warned that overall losses caused by the US subprime mortgage crisis might reach $300bn.

On Friday, the dollar fell to a record low of $1.4966 against the euro, an all-time trough of SFr1.0899 against the Swiss franc and Y107.56 against the yen, its weakest level since May 2005.

However, the dollar retraced its losses as comments from the European Central Bank hit currency traders’ dealing screens.

Miguel Angel Fernandez Ordonez, governor of the Bank of Spain and an ECB council member, said world financial turmoil threatened a stronger-than-expected slowdown in the Eurozone, while Jean Claude Trichet, ECB president, said brutal” movements in the foreign exchange market were unwelcome. The comments had the desired effect, sending the dollar back up to $1.4803 against the euro, SFr1.1020 against the Swiss franc and Y107.90 against the yen.

 


TradingEconomics.com, Bloomberg, Financial Times
11/23/2007 9:04:09 AM