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| Version 1 | Version 2 |
|---|---|
| Dollar at record low against euro | Dollar at record low against euro |
| (10 minutes later) | |
| The US dollar has fallen to a record low against the euro as investors bet that the Federal Reserve will cut interest rates to help the economy. | The US dollar has fallen to a record low against the euro as investors bet that the Federal Reserve will cut interest rates to help the economy. |
| The US dollar dropped to $1.388 per euro, passing the previous record of $1.3852 that was set on 24 July. | The US dollar dropped to $1.388 per euro, passing the previous record of $1.3852 that was set on 24 July. |
| Many analysts are predicting that the Fed will cut interest rates next week as it looks to reassure markets and consumers amid a global credit crunch. | Many analysts are predicting that the Fed will cut interest rates next week as it looks to reassure markets and consumers amid a global credit crunch. |
| The dollar has weakened against the euro for six sessions in a row. | |
| "The market's main focus remains on US economic fundamentals," said Tomohiro Iwata of Goldman Sachs. | "The market's main focus remains on US economic fundamentals," said Tomohiro Iwata of Goldman Sachs. |
| He added that investors would be debating whether the Fed will cut rates by a quarter or a half of a percentage point, and what comments they make following the any move. | He added that investors would be debating whether the Fed will cut rates by a quarter or a half of a percentage point, and what comments they make following the any move. |
| Rate spread | |
| At the heart of the dollar's decline have been problems in the US housing market that were caused by the Fed increasing interest rates in order to slow accelerating inflation. | |
| As a result of the higher borrowing costs an increasing number of borrowers have defaulted on loans, especially in the sub-prime mortgage market, which specialises in lending to people with poor or non-existent credit histories. | |
| This, in turn, has spread to global credit markets as many of the sub-prime mortgages were repackaged and sold on to European and UK banks as investment assets. | |
| Analysts are now speculating that the Fed will cut its main interest rate to ease the pressure on consumers, and help reassure the global markets that it is willing to intervene to ensure financial stability. | |
| The Fed's main interest rate is currently at 5.25% and any cut would be the first in four years. | |
| At the same time, there is speculation that European rates may rise as the region's economy grows by more than 2% this year. |