Dollar Falls Most Against Euro Since 1999

The dollar declined the most against the euro since the 15-nation currency’s 1999 debut and sank to a 13-year low versus the yen after the Federal Reserve cut its target lending rate to as low as zero.

The pound fell to a record against the euro after a government report showed U.K. unemployment rose last month at the fastest pace since 1991. The yen remained higher even as Dow Jones Newswires reported that Japan’s finance minister said he’s ready to take steps in the currency market.

The dollar fell as much as 3 percent to $1.4437 per euro from $1.4002 yesterday, before trading at $1.4336 at 10:30 a.m. in New York. It was the biggest intraday drop since the euro’s inception. The U.S. currency decreased 1.8 percent to 87.41 yen from 89.05 yesterday and reached 87.14, the lowest since July 1995. The euro increased 0.5 percent to 125.33 yen from 124.71.

The pound fell to an all-time low against the euro for an eighth day after the Office for National Statistics said the number of people receiving jobless benefits rose by 75,700 to 1.07 million. Bank of England policy makers voted 9-0 to cut the nation’s benchmark on Dec. 4 to 2 percent, minutes showed. Sterling weakened as much as 2.3 percent to 92.07 pence per euro. The pound fell 1.1 percent to $1.5402.

The Fed lowered its target rate yesterday to a range of zero to 0.25 percent, from 1 percent, below the Bank of Japan’s 0.3 percent rate. The central bank reiterated plans to buy agency debt and mortgage-backed securities and said it will study buying Treasuries, a policy known as quantitative easing.

The target lending rate was cut to below the BOJ’s rate for the first time since 1993. Japanese policy makers struggled in the 1990s to revive growth as the combination of deflation and recessions stranded the nation in the Lost Decade.

The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 2.2 percent to 78.944.

The dollar has fallen 13 percent from a 2 1/2-year high of $1.2330 per euro reached Oct. 28 on reduced demand for short- term funding in the greenback.

The U.S. currency fell 21 percent against the yen this year, the most since 1987, as more than $1 trillion of credit- market losses sparked a seizure in money markets and threw the U.S. economy into a recession.,
12/17/2008 7:42:56 AM