NEW YORK (AFP) — The dollar remained anchored near record lows against the euro Monday amid persistent fears on the US economy despite a better-than-expected survey of the service sector.
At 2200 GMT, the euro fetched 1.4464 dollars from 1.4514 dollars late on Friday in New York.
Last Friday, the European single currency had struck an all-time high of 1.4528 dollars.
The greenback fell slightly to 114.49 yen from 114.84 late Friday.
"The mood is still nervous and the dollar is effectively tracking developments in credit markets," Neil Mackinnon, chief economist at ECU Group, said.
The dollar was close to a 26-year low against the British pound and a 47-year low against the Canadian dollar amid concern about the exposure of major US banks to bad housing loans.
The head of banking giant Citigroup stepped down over the weekend as the group said it expected to write off up to 11 billion dollars related to problems in the subprime mortgage sector.
"I stated in the past that the tightening of credit that could push our leveraged economy into a recession would be born in the balance sheets of the big banks and the write-downs and downgrades are certainly reinforcing my concern," said Brad Tottle at Raymond James & Co.
Credit worries overshadowed the ISM survey of the services sector for October, which came in at 55.8 points against 54.8 in September and analysts' forecasts of 54.
Markets were set to pay close attention to remarks from Federal Reserve chairman Ben Bernanke to Congress on Thursday after fresh worries about the impact of the US mortgage and credit woes rattled global stock markets last week.
"Market participants fear another rate cut appropriate at December Fed meeting as US consumption slows," added Eugene Lightner at PNC Bank.
"The weaker dollar combined with continued subprime losses ignited lack of investor confidence evident in falling stock and energy values."
The Fed last week cut its benchmark lending rate by 25 basis points to 4.50 percent to try to cushion the economy from a housing slump, following a hefty 50-basis-point reduction in September.
Meanwhile the European Central Bank was expected to hold eurozone borrowing costs at 4.00 percent on Thursday.
"There is significant uncertainty in the market and on the economy that the ECB has to consider, including higher oil prices and a weak financial sector," said Thomas Lam, treasury economist at United Overseas Bank.
"I don't think the current backdrop warrants a rate hike."
The subprime mortgage crisis rocked financial markets in August as US homeowners with shaky credit histories defaulted on their loans, triggering a credit squeeze as major investors including banks struggled to cover losses.
Market players were also watching the latest political upheaval in Japan although the impact on the yen appeared to be limited, dealers said.
Japanese opposition leader Ichiro Ozawa resigned on Sunday after his party rejected a proposal by the government to form a power-sharing coalition.
In late New York trade the dollar stood 1.1537 Swiss francs after 1.1533 late Friday.
The pound was at 2.0799 dollars after 2.0873.
Copyright © 2009 AFP. All rights reserved. More »
