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Dollar at record low against euro

By Kosuke Goto | China Daily | Updated: 2007-10-30 07:26

The dollar fell to a record low against the euro on speculation the Federal Reserve will cut interest rates this week to prevent the worst US housing slump in 16 years from slowing the economy.

The US currency slid to its lowest in 33 years against the Canadian dollar and a 23-year low versus Australia's dollar. Yields on two-year Treasuries are now the least among the Group of Seven nations excluding Japan after traders increased bets the Fed will cut rates tomorrow.

"I remain bearish on the dollar," said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney.

"The US has the lowest yields of all other major countries except Japan and Switzerland. This is sending people into a whole range of higher-yielding currencies."

The dollar fell as low as $1.4426 per euro, the weakest since the introduction of the 13-nation currency in 1999, before trading at $1.4425 as of 3:05 pm in Tokyo from $1.4393 in New York on Friday. It may drop to $1.4530 this week, Gibbs forecast. The US dollar was at 114.17 yen from 114.19 yen.

The dollar's 8.4 percent loss against the euro this year has prompted French President Nicolas Sarkozy to warn that exports from the $10 trillion euro-region economy may suffer. By contrast, the cheaper dollar has buoyed US shipments overseas. The nation's trade deficit in August narrowed to $57.6 billion, the least since January, the Commerce Department said on October 11.

The currency's drop also helped drive crude oil to a record and gold prices to the highest since January 1980, encouraging investors to buy assets in commodity producing nations.

The dollar fell against 13 of the 16 most-actively traded currencies. It slid to 77.08 US cents versus New Zealand's dollar from 76.62 and as low as 92.46 US cents against Australia's dollar, the weakest since May 1984. It also fell to $1.0437 against the Canadian dollar, the lowest since 1974.

Bloomberg News

(China Daily 10/30/2007 page16)

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