Fresh low for greenback

Source: Exec Digital USA

Date :19/10/2007 09:21:35

The dollar hit a fresh record low against the euro on Friday, pressured by the growing view that a slowdown in the U.S. economy will force another cut in interest rates this month.

Traders also sold the U.S. currency ahead of a meeting of the Group of Seven finance ministers and central bankers in Washington.

There has been some speculation that their statement late on Friday could address the weakness on the dollar and other currency imbalances.

Weak U.S. data, coupled with poor results from several heavyweight U.S. banks, have fueled expectations of a growth-boosting but dollar-negative rate cut from the Federal Reserve on October 31.

The dollar index, a measure of its value against six major currencies, traded lower at 77.506 and earlier in Asia hit 77.406, its lowest ever since its inception over 30 years ago after the Bretton Woods exchange rate agreement broke down.

Further cuts

The dollar's drop came as the Labor Department reported a sharp rise in claims for unemployment benefits last week, unnerving investors who have seen the job market as one the economy's stronger points and an offset to the deteriorating housing market.

A decrease in U.S. housing starts to 14-year lows, soft regional manufacturing data and a 32 percent fall in quarterly earnings from Bank of America this week have also lifted market expectation that the dollar may have further to fall.

Market expectations have solidified for another reduction in the Federal Reserve's benchmark federal funds rate when the Fed meets Oct. 30-31 with fund futures pointing to a more than 70 percent chance of a quarter-point rate cut.

Adding to the dollar's woes, oil hit a new record high of $90 a barrel overnight, while gold hit a 28-year high of $770 an ounce.

October 19 2007