Dollar hits new low against euro
NEW YORK (AFP) — The dollar fell to a fresh record low against the euro Monday in a dearth of US economic data and as the market banked on a further US Federal Reserve interest rate cut.
The euro was at 1.4084 dollars around 2100 GMT, down slightly from 1.4090 dollars in New York late Friday.
Earlier the euro -- the common currency of the 13-nation eurozone -- hit a new record high, at 1.4130 dollars.
The dollar fell to 114.85 yen from 115.35 late Friday.
The euro has blazed a record-breaking trail against the dollar in recent weeks as currency investors fretted over the state of the US economy and the likelihood of lower American borrowing costs.
The dollar's continued slide "probably just reflects the on-going negative sentiment against the currency that was set off by the Federal Reserve's decision last week to aggressively cut US interest rates," said Patrick Fearon of AG Edwards.
"At this point, we see no near-term reason for that negative sentiment to dissipate, so it looks like the dollar will probably continue to fall for a while yet."
The dollar strengthened a touch after US Federal Reserve official Richard Fisher said the Fed's rate cut last week prevented an excessive slowdown in economic growth.
Markets have been anticipating comments from Fisher and Fed chairman Ben Bernanke Monday for clarification on the central bank's thinking when it cut it base federal funds rate by a half-point last week to 4.75 percent.
The Fed is trying to prevent a severe economic slowdown following the collapse of the US subprime home loan market.
Fisher said the Fed would have risked "unacceptably slow economic growth" had it not cut interest rates last week.
He said that recent trends on inflation provide "some wiggle room to adjust our course" on rates and that if a further correction either toward growth or against inflation is needed, "we will make it."
Jeoff Hall at Thomson IFR Markets noted that the Fed will monitor economic data for signals that it needs to act again but said "there's very little data this week that would put them closer to a rate change."
In terms of the dollar, though, other analysts believe the data will be weak enough to fuel speculation of further rate cuts and consequently weaken the US currency.
All eyes will be focused Tuesday on two economic reports: sales of existing homes in August, when the subprime mortgage crisis was roiling financial and equities markets, and consumer confidence in September.
"The general tone of the US data this week is likely to compound expectations for further cuts in US interest rates -- with market attention now settling on the possibility of a further quarter point-cut at the October Federal Open Market Committee meeting," said economists at Bear Stearns.
Meanwhile the euro's rising strength is chafing some business and political leaders in Europe, who argue it is undermining exports.
French President Nicolas Sarkozy heads this movement and recently described the euro at 1.40 dollars as a "problem" for the eurozone economies, which include heavyweights France and Germany.
The European Central Bank, which has independence over monetary policy in the eurozone, has rebuffed political pressure to cut interest rates as it focuses on a primary goal of keeping inflation under control.
The ECB's benchmark interest rate is currently 4.00 percent.
In late New York trading, the dollar was at 1.1723 Swiss francs, slightly up from 1.1717 late Friday.
The pound was at 2.0219 dollars, up from 2.0203.
