Dollar Sinks To New Low

Dollar Sinks To New Low

October 26, 2007

FRANKFURT, Germany (AP) — The dollar fell to another new low against the euro Friday in midmorning trading on speculation that U.S. interest rates will be cut again.

After rising to a record $1.4375, the euro slipped back to $1.4369, higher than the $1.4319 it bought in late Thursday trading in New York.

The euro last hit a record high against the dollar Monday, rising to $1.4348.

The euro was lifted higher by a spate of sour economic reports from the United States, including a report that showed U.S. orders for durable goods dropped 1.7 percent in September, after an even bigger 5.3 percent plunge in August.

That was the first back-to-back decline in more than a year and took economists by surprise.

The data exacerbated concern about the health of the U.S. economy and has caused investors to sell their dollars in a climate of market nervousness ahead of next week’s U.S. Federal Reserve Bank meeting on interest rates.

“Yesterday’s run of downbeat economic data out of the U.S. is underlining the fact that the Fed’s last rate cut of 50 basis points clearly hasn’t been sufficient to kick start demand,” said James Hughes, a market analyst with CMC Markets in London.

He said traders and markets are expecting the bank to cut its benchmark rate from 4.75 percent next week. That, in turn, has caused the dollar to lose value because of speculation that the European Central Bank will increase its interest rates.

Although lower interest rates can jump-start the economy, they can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns. Higher rates can boost a currency.

In other trading, the British pound bought $2.0564, up slightly from the $2.0511 it bought on Thursday.

Meanwhile, the dollar was up against the yen, rising to 114.31 yen on Friday compared with 144.06 yen on Thursday.


‘Mr. Yen’ warns that dollar could plunge in 2008

Bloomberg News
October 19, 2007

TOKYO: The dollar could “plunge” in 2008, prompting the United States, the European Union and Japan to intervene in foreign exchange markets, Eisuke Sakakibara, the former top currency official of Japan, said Thursday.

U.S. economic growth may slow to less than 1 percent next year as losses on loans to homeowners with poor credit erode consumer spending and bank earnings, he said in an interview in Tokyo. Sakakibara was known as Mr. Yen because of his ability to influence the currency market during his time at the Ministry of Finance from 1997 to 1999.

“Should growth fall below 1 percent, we could see a plunge in the dollar,” said Sakakibara, now a professor at Waseda University in Tokyo. “Some form of intervention would be necessary to stop it, and that would require coordinated effort from all three major economies.”

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