Dollar stumbles to record low against euro
Sunday, 23 September 2007
NEW YORK, Sept 22 (AFP): The dollar stumbled to a record low against the euro yesterday amid market expectations the US Federal Reserve will continue to cut interest rates.
The single European currency was at 1.4090 dollars around 2100 GMT, up from 1.4065 late Thursday.
The euro earlier hit an all-time high of 1.4120 against the dollars, weakened by this week's Fed surprisingly robust half-point rate cut.
The euro also climbed against the Japanese currency, rising to 162.55 yen from 161.25 late Thursday. The yen also weakened against the dollar, falling to 115.35 dollars from 114.63.
"The expectation of bigger interest rates cuts in the US relative to other countries, as a result of intensifying concerns about the US economy, are weighing heavily on the currency (the dollar)," said Calyon analyst Mitul Kotecha.
He added that the European single currency "looks set to push even higher over the short term."
Marc Chandler, global head of currency strategy at Brown Brothers Harriman, agreed.
"A further decline in the dollar is likely. The euro has never been higher, but ironically the dollar has been lower against the European currencies," he said. "Prior to the advent of the euro, in the spring of 1995, the dollar was about three per cent lower against the German mark."
Chandler said that converting the record low for the dollar to the euro would put the single currency a little more than three per cent higher to near 1.4570 dollars. "This appears to be the next important psychological target." MORE
The dollar has fallen sharply since the Fed slashed its benchmark federal funds rate on Tuesday by half a per centage point to 4.75 per cent. The European Central Bank's key rate stands at 4.00 per cent.
Fed chairman Ben Bernanke said Thursday that US housing woes may deepen, saying problems in subprime mortgages to risky borrowers "have far exceeded even the most pessimistic estimates."
And the dollar has been undermined by speculation that Saudi Arabia may abandon its peg to the US currency after its monetary authority refrained from following the Fed in cutting rates this week, analysts said.
"Fears that the Middle East will sell US dollars, despite Saudi denials that they plan to de- peg the riyal from the USD, isn't helping the situation," said Patricia Lifson of PNC Financial Services.
There are lingering concerns about whether the deep US rate cut will succeed in easing the credit squeeze, dealers said.
"Appetite for the dollar is weakening due to receding hopes that rate cuts can resolve the credit crunch," said Daisuke Uno, strategist at Sumitomo Mitsui Banking Corp.
In late New York trading, the dollar was at 1.1717 Swiss francs, down from 1.1722 late Thursday.
The pound was at 2.0203 dollars, up from 2.0079.
And the Canadian dollar hovered around parity with the dollar reached for the first time in three decades the prior day, at 0.9992 US dollars.
The single European currency was at 1.4090 dollars around 2100 GMT, up from 1.4065 late Thursday.
The euro earlier hit an all-time high of 1.4120 against the dollars, weakened by this week's Fed surprisingly robust half-point rate cut.
The euro also climbed against the Japanese currency, rising to 162.55 yen from 161.25 late Thursday. The yen also weakened against the dollar, falling to 115.35 dollars from 114.63.
"The expectation of bigger interest rates cuts in the US relative to other countries, as a result of intensifying concerns about the US economy, are weighing heavily on the currency (the dollar)," said Calyon analyst Mitul Kotecha.
He added that the European single currency "looks set to push even higher over the short term."
Marc Chandler, global head of currency strategy at Brown Brothers Harriman, agreed.
"A further decline in the dollar is likely. The euro has never been higher, but ironically the dollar has been lower against the European currencies," he said. "Prior to the advent of the euro, in the spring of 1995, the dollar was about three per cent lower against the German mark."
Chandler said that converting the record low for the dollar to the euro would put the single currency a little more than three per cent higher to near 1.4570 dollars. "This appears to be the next important psychological target." MORE
The dollar has fallen sharply since the Fed slashed its benchmark federal funds rate on Tuesday by half a per centage point to 4.75 per cent. The European Central Bank's key rate stands at 4.00 per cent.
Fed chairman Ben Bernanke said Thursday that US housing woes may deepen, saying problems in subprime mortgages to risky borrowers "have far exceeded even the most pessimistic estimates."
And the dollar has been undermined by speculation that Saudi Arabia may abandon its peg to the US currency after its monetary authority refrained from following the Fed in cutting rates this week, analysts said.
"Fears that the Middle East will sell US dollars, despite Saudi denials that they plan to de- peg the riyal from the USD, isn't helping the situation," said Patricia Lifson of PNC Financial Services.
There are lingering concerns about whether the deep US rate cut will succeed in easing the credit squeeze, dealers said.
"Appetite for the dollar is weakening due to receding hopes that rate cuts can resolve the credit crunch," said Daisuke Uno, strategist at Sumitomo Mitsui Banking Corp.
In late New York trading, the dollar was at 1.1717 Swiss francs, down from 1.1722 late Thursday.
The pound was at 2.0203 dollars, up from 2.0079.
And the Canadian dollar hovered around parity with the dollar reached for the first time in three decades the prior day, at 0.9992 US dollars.