27 February 2008
Crunch Time for the Dollar
Posted by Joy Bischoff under: World Economy .
As top economists predicted, the rapid and drastic lowering of the interest rates has weakened the dollar which indicates difficulties ahead. Wall Street has been short-sighted, wanting to keep the wolf from the door now, they have ignored the whole pack howling in the distance.
Dollar Falls to Record Low of $1.50 per Euro on Rate Outlook
By Kosuke Goto and Stanley White
Feb. 27 (Bloomberg) — The dollar fell to a record low of $1.50 per euro on speculation Federal Reserve Chairman Ben S. Bernanke will indicate the U.S. central bank is prepared to keep lowering interest rates.
The dollar fell against 12 of the 16 most-active currencies before Bernanke testifies to Congress today. A government report will probably show a drop in new home sales, bolstering the Fed’s case for cutting its benchmark 3 percent rate…
“We’re going into a new leg of dollar weakness,” Tony Morriss, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd., Australia’s third-biggest bank, said in an interview with Bloomberg Television. “The Federal Reserve is sending a pretty clear signal they need to support growth.”
The dollar touched $1.5047 per euro, the lowest since the European single currency was introduced in 1999, before trading at $1.4994 as of 1:03 p.m. in Tokyo from $1.4974 in late New York yesterday. It also fell to 107.13 yen from 107.28 yen. The euro was at 160.63 yen from 160.67. The dollar may fall to $1.53 per euro in the next three months, Morriss said.
The U.S. currency declined the most against the Taiwan dollar and the South African rand before Bernanke delivers his semi-annual testimony to the House Financial Services Committee at 10 a.m. in Washington…
The slump in the dollar pushed oil prices to a record yesterday and increased the cost of buying wheat, sugar, copper, cotton and cocoa…
The dollar index will tumble to a record low “within weeks” as the Fed lowers rates to prevent the world’s largest economy from slipping into a recession, Bank of America N.A. analysts said in a research note dated today.
“It’s crunch time for the dollar,” said Yuji Saito, head of foreign-exchange sales in Tokyo at Societe Generale SA, a unit of France’s second-largest bank by market value. “Bernanke may know that monetary policy alone cannot support the slowing U.S. economy.”
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