Dollar Falls to Two-Month Low

The dollar fell to a two-month low against the euro as the Federal Reserve cut the target lending rate to a range of zero to 0.25 percent, making the greenback the lowest-yielding currency among industrialized nations.

The U.S. dollar dropped for a fifth day versus the euro, the longest stretch of losses since February, as the central bank said in its statement that it will do whatever is needed to ease the recession. European Central Bank President Jean-Claude Trichet said yesterday there’s a limit to how far the bank can cut interest rates and signaled it may pause in January.

The dollar fell 1.9 percent to $1.3957 per euro at 2:45 p.m. in New York, from $1.3688 yesterday. It reached $1.3988, the weakest level since Oct. 2. The dollar dropped 1.5 percent to 89.29 yen from 90.65. It touched 88.53 on Dec. 12, the lowest level since August 1995. The euro gained 0.5 percent to 124.72 yen from 124.09.

Policy makers meeting in Washington reduced the fed funds target from 1 percent after staging a half-point reduction on Oct. 29. Nine rate cuts in the past 14 months and $1.4-trillion in emergency lending have failed to reverse the recession.

The U.S. currency gained 5.7 percent versus the euro and 30 percent against the pound this year on short-term funding pressure and demand for the greenback as a haven., Bloomberg
12/16/2008 12:01:56 PM