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Dollar sinks to new low against euro amid expectations of another US rate cut
The Associated Press
Published: October 29, 2007
NEW YORK: The dollar descended to new long-term lows Monday against several widely traded counterparts, including the euro and Canadian dollar, as investors pondered the likelihood of a reduction in benchmark U.S. interest rates.
Ahead of the decision Wednesday by the rate-setting Federal Open Market Committee, the greenback stayed mostly range-bound in New York trading, although those ranges were in record-low territory.
The euro hit an all-time high of $1.4439 during the overnight session, while the greenback bottomed out in afternoon trading at C$0.9517 - its lowest level in 37 years.
Sterling traded at three-month highs against the greenback on news that consumer lending in the U.K. shot up to year-high levels, signaling that the recent slew of discouraging U.S. economic reports are primarily of U.S. concern. The pound remained within striking distance of the 26-year highs it reached in July.
The Australian dollar pressed to a fresh 23-year high at 0.9272, mainly on expectations the Reserve Bank of Australia will raise interest rates, said analysts.
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Late Monday afternoon in New York, the euro was at $1.4426 from $1.4390 late Friday, while the dollar was at 114.62 yen from Y114.23. The euro was at 165.35 yen from Y164.38. The U.K. pound was at $2.0630 from $2.0531, according to EBS. The dollar was quoted at 1.1644 Swiss francs from CHF1.1641.
Despite overall dollar weakness, the yen emerged as Monday's overall loser on a spike of risk appetite that followed a rise in global equities markets. The Dow Jones Industrial Average was up 63 points at the close of U.S. trading.
The Federal Reserve is expected to trim its benchmark rate from 4.75 percent to 4.50 percent. Some analysts even suggest the Fed may cut down to 4.25 percent. Low rates means lower returns for investors and tend to hurt the appeal of the dollar for investors.
Last month, the Fed cut interest rates by 50 basis points, its first reduction in more than four years, kicking the dollar on a fast slope down.
However, if the Fed is able to steer the U.S. from recession, "then interest rate cuts will ultimately benefit the (dollar)," said Mansoor Mohi-uddin, managing director of foreign exchange strategy at UBS in London.
The recent rise of risk appetite is unlikely to continue as global growth slows, he said. That will lead to greater demand for safe haven currencies, such as the dollar, which typically benefits from repatriation flows during periods of risk aversion.
But Steve Barrow, a foreign exchange analyst for Bear Stearns in London, says the Fed's decision isn't "particularly important."
"As far as we can see the die has already been cast for a much weaker dollar, and nothing is going to save it now," said Barrow.
The question at hand, he said, is when will officials attempt to do something about it.
In a speech in India Monday, Treasury Secretary Paulson didn't change his stance. He repeated the long-standing position that a strong dollar is in the U.S. interest and that currency values should be determined by market forces and be based on economic fundamentals.
A climb in oil future and gold prices also hurt the dollar. The strength of commodities helped the Canadian dollar advance towards its 37-year high Monday. The Canadian unit has appreciated a total 22 percent since the beginning of the year.
The Canadian dollar clambered to its peak level against the U.S. dollar since Ottawa unpegged the two currencies in May 1970. In midmorning trading, the greenback had dropped below its earlier post-1970 low of C$0.9576, registered in April 1974, and eventually reached a bottom of C$0.9517 in afternoon activity, according to EBS.
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Riva Froymovich is a correspondent of Dow Jones Newswires.
The Associated Press
Published: October 29, 2007
NEW YORK: The dollar descended to new long-term lows Monday against several widely traded counterparts, including the euro and Canadian dollar, as investors pondered the likelihood of a reduction in benchmark U.S. interest rates.
Ahead of the decision Wednesday by the rate-setting Federal Open Market Committee, the greenback stayed mostly range-bound in New York trading, although those ranges were in record-low territory.
The euro hit an all-time high of $1.4439 during the overnight session, while the greenback bottomed out in afternoon trading at C$0.9517 - its lowest level in 37 years.
Sterling traded at three-month highs against the greenback on news that consumer lending in the U.K. shot up to year-high levels, signaling that the recent slew of discouraging U.S. economic reports are primarily of U.S. concern. The pound remained within striking distance of the 26-year highs it reached in July.
The Australian dollar pressed to a fresh 23-year high at 0.9272, mainly on expectations the Reserve Bank of Australia will raise interest rates, said analysts.
Today in Business
Merrill chooses interim leader, begins search for CEO774 arrests in China over safetyUBS reports first quarterly loss in nearly 5 years
Late Monday afternoon in New York, the euro was at $1.4426 from $1.4390 late Friday, while the dollar was at 114.62 yen from Y114.23. The euro was at 165.35 yen from Y164.38. The U.K. pound was at $2.0630 from $2.0531, according to EBS. The dollar was quoted at 1.1644 Swiss francs from CHF1.1641.
Despite overall dollar weakness, the yen emerged as Monday's overall loser on a spike of risk appetite that followed a rise in global equities markets. The Dow Jones Industrial Average was up 63 points at the close of U.S. trading.
The Federal Reserve is expected to trim its benchmark rate from 4.75 percent to 4.50 percent. Some analysts even suggest the Fed may cut down to 4.25 percent. Low rates means lower returns for investors and tend to hurt the appeal of the dollar for investors.
Last month, the Fed cut interest rates by 50 basis points, its first reduction in more than four years, kicking the dollar on a fast slope down.
However, if the Fed is able to steer the U.S. from recession, "then interest rate cuts will ultimately benefit the (dollar)," said Mansoor Mohi-uddin, managing director of foreign exchange strategy at UBS in London.
The recent rise of risk appetite is unlikely to continue as global growth slows, he said. That will lead to greater demand for safe haven currencies, such as the dollar, which typically benefits from repatriation flows during periods of risk aversion.
But Steve Barrow, a foreign exchange analyst for Bear Stearns in London, says the Fed's decision isn't "particularly important."
"As far as we can see the die has already been cast for a much weaker dollar, and nothing is going to save it now," said Barrow.
The question at hand, he said, is when will officials attempt to do something about it.
In a speech in India Monday, Treasury Secretary Paulson didn't change his stance. He repeated the long-standing position that a strong dollar is in the U.S. interest and that currency values should be determined by market forces and be based on economic fundamentals.
A climb in oil future and gold prices also hurt the dollar. The strength of commodities helped the Canadian dollar advance towards its 37-year high Monday. The Canadian unit has appreciated a total 22 percent since the beginning of the year.
The Canadian dollar clambered to its peak level against the U.S. dollar since Ottawa unpegged the two currencies in May 1970. In midmorning trading, the greenback had dropped below its earlier post-1970 low of C$0.9576, registered in April 1974, and eventually reached a bottom of C$0.9517 in afternoon activity, according to EBS.
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Riva Froymovich is a correspondent of Dow Jones Newswires.
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