LONDON, 22 November 2007 — The dollar yesterday slumped to a fresh record low against the euro owing to weaker US growth projections and the prospect of another cut to American interest rates, traders said.
The European single currency struck a record peak of 1.4855 dollars - the highest level since the euro’s creation in 1999. In late European trade, the euro stood at 1.4833 dollars, compared with 1.4836 in New York late on Tuesday.
The dollar dipped to 108.55 yen, against 109.98 late on Tuesday, after earlier touching 108.27 yen, the lowest level since June 2005. It also hit a low against the Swiss franc at 1.1025 per dollar.
“The dollar has come under renewed downward pressure after relatively upbeat real GDP forecasts by the Federal Reserve were coupled with warnings over the risks to growth from deteriorating financial market conditions,” said Lee Hardman, currency economist at The Bank of Tokyo-Mitsubishi in London.
The US central bank on Wednesday trimmed back its growth projections citing weakness in housing and tighter credit conditions, but suggested policymakers are unsure about future rate decisions.
The Federal Reserve projected growth next year in a range of 1.8 to 2.5 percent, down from a prior forecast of 2.5 to 2.75 percent.
Meanwhile the dollar’s fall to the 108-yen level raised new questions about whether the Bank of Japan would intervene to rein in the strong yen, which hurts Japanese exporters, as it did a decade ago.
Elsewhere, the pound touched its lowest level against the euro since June 2003 at 72 pence, with the market depressed at the prospect of an interest rate cut, possibly as early as December.
In late European trade Wednesday, the euro changed hands at 1.4833 dollars, against 1.4836 late on Tuesday, at 160.99 yen (163.21), 0.7207 pounds (0.7181) and 1.6371 Swiss francs (1.6409). The dollar stood at 108.55 yen (109.98) and 1.1038 Swiss francs (1.1058). The pound was at 2.0584 dollars (2.0666).
Meanwhile, World equities were hammered yesterday by soaring oil prices and fears over the global economy, with steep falls in Asia, Europe and the United States.
In Europe the main stock exchanges dived, with the London FTSE 100 index losing 2.50 percent at 6,070.90 at the close. In Paris the CAC 40 shed 2.28 percent to end the day at 5,381.30 while in Frankfurt the DAX lost 1.47 percent to close at 7,518.42. The Euro Stoxx 50 index of leading euro zone shares lost 1.85 percent to 4,197.99.
Across the Atlantic US stocks also fell in midsession trade on the oil and dollar performance. The Dow Jones Industrial Average dipped 0.95 percent to 12,886.75. The tech-rich NASDAQ composite lost 1.11 percent to 2,568.11 and the Standard & Poor’s 500 broad-market index fell 1.13 percent to 1,423.50.
Across Asia, stock market trading screens also turned red, as Hong Kong tumbled 4.2 percent, Tokyo closed down 2.46 percent at a 16-month low and Seoul dropped to a three-month low, off 3.5 percent.
