Dollar dips to lowest in 7 weeks
The dollar fell to a seven-week low against the euro as investors bet US interest rates will fall below those of the 15 nations that share the euro for the first time in three years.
The dollar declined for a third week as Federal Reserve officials including Chairman Ben Bernanke signaled they favor greater "insurance" against an economic slowdown amid the slump in the housing market. European Central Bank council member Klaus Liebscher said he sees "significant" upside risks to inflation.
"In terms of the subprime crisis, the US has been the centre of the storm and it will have to pay," said Bilal Hafeez, global head of currency strategy in London at Deutsche Bank AG, the world's largest foreign currency trader. "The euro will continue going higher" and may trade at $1.55 by the end of the first quarter.
The dollar fell to $1.4881 against the euro, the weakest since declining to a record low on Nov 23, and was trading at $1.4906 at 10:12 am in London, from $1.4776 on January 11 in New York. The euro traded at 160.51 Japanese yen, from 160.79 late last week. Against the UK pound, it rose 0.5 percent to 75.90 pence, after rising to a record 75.92 pence, from 75.52.
The euro rose to a record against the currencies of the region's 24 biggest trading partners on Jan 11.
It advanced against all but three of the 16 most active currencies yesterday.
The common European currency accelerated gains against the dollar after rising beyond $1.4825 and $1.4850, where orders to buy the currency were placed, said Lee Wai Tuck, a strategist at Forecast Pte Ltd in Singapore. Traders sometimes place automatic instructions to limit losses in case bets go the wrong way. Trading volumes are below average because of a public holiday in Japan.
The dollar fell against 15 of the 16 most-active currencies before a Commerce Department report economists in a Bloomberg News survey say will show retail sales were unchanged in Dec. The currency dropped to $1.9638 against the pound from $1.9566, and was trading at 1.0891 against the Swiss franc from 1.1014. It also fell to the lowest since Nov 27 against the yen and was recently trading at 107.72 yen.
The euro has risen 15 percent in the past 12 months against the dollar as the Fed cut borrowing costs three times since Sept 18 to prevent the worst housing slump in 16 years from dragging the economy into recession.
"We're expecting continued US dollar weakness," said Tobias Davis, senior foreign-exchange dealer at Custom House Global Foreign Exchange in Sydney. "It really is a concern that growth is grinding to a halt faster than some people expect."
Agencies
(China Daily 01/15/2008 page17)
