Dollar Sinks to Record Low Against Euro

The greenback continues to fall (and fall and fall):

The dollar briefly sank to a record low against the euro on Thursday for a second successive day amid speculation that the U.S. central bank will cut interest rates amid turbulence in financial markets.
The euro rose to $1.3927, topping the record $1.3914 reached the previous day. It then settled back to $1.3887 in early afternoon European trading and was below the $1.3908 it bought late Wednesday in New York.
A higher euro makes goods from the 13-nation euro zone more expensive for customers elsewhere, and cuts into manufacturers’ profits if they try to keep the dollar price of products constant. While it makes U.S. exports cheaper, it cuts the spending power of Americans visiting Europe.
The euro has benefited from healthy economic news in the euro zone and the European Central Bank’s campaign of gradual interest rate increases.
However, its current strength is widely seen primarily as a result of problems afflicting the dollar.
The subprime mortgage crisis in the U.S. and signs of economic frailty, particularly weak August jobs data, have prompted speculation that the Federal Reserve will cut interest rates by as much as half a percentage point next week from the current 5.25 percent.

Posted by on September 13th, 2007 at 11:11 am


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