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Dollar weak on US economy fears Dollar declines to fresh euro low
(about 4 hours later)
The dollar remained weak against both the euro and the yen in early Tuesday trading, hit by further fears over the state of the US economy. The dollar has fallen to a fresh all-time low against the euro, as it continues to be knocked by fears over the state of the US economy.
After more reports of losses in the US banking sector due to bad mortgage debt and the resulting credit crunch, the dollar was at $1.4674 against the euro. After more reports of losses in the US banking sector, the dollar touched $1.4782 against the euro in late morning trading in Europe.
This is near the dollar's record low of $1.4752 against the European currency, which it hit at the start of the month. This was worse than the dollar's previous record low of $1.4752 for one euro, seen at the start of the month.
Meanwhile, one dollar was worth 110.29 yen in Asian trading. The dollar also weakened against sterling, with one pound worth $2.0655.
On Friday, 9 November, the pound hit $2.1144, its higher level against the dollar since the early 1980s.
Rate movesRate moves
The latest bad news from the US banking sector came as Goldman Sachs downgraded the shares of Citigroup, and forecast the bank giant would report $15bn (£7.3bn) in losses. The continuing dollar weakness has been sparked by the US bad mortgage debt crisis, and the knock-on credit squeeze, which has led to a growing number of American banks revealing multi-million dollar losses.
Analysts say the continuing problems in both the US housing and banking sector make a further interest rate cut from the Federal Reserve increasingly likely when officials next meet in December. The Fed and the money markets are staring each other down and the question is who will blink first Thomson analyst John Noonan
The Fed last cut interest rates in October to 4.5%, in an effort to kick-start the faltering housing and credit markets, as well as making borrowing cheaper to encourage consumer spending in the run-up to the key Christmas shopping period. This has weakened the dollar as analysts expect the Federal Reserve to cut US interest rates further when it meets in December in an effort to ease problems in both the housing and credit markets.
Lower interest rates make the dollar less attractive for currency investors, who instead have been turning to other currencies, such as the euro, pound, Swiss franc, and Japan's yen.
"The Fed and the money markets are staring each other down and the question is who will blink first," said Thomson analyst John Noonan."The Fed and the money markets are staring each other down and the question is who will blink first," said Thomson analyst John Noonan.
The Fed last cut interest rates in October to 4.5%.
"Markets have been very sensitive to a bunch of negative news from the US, forcing investors to shun risk and instead hedge their positions," said Hideaki Inoue, chief foreign exchange strategist at Mitsubishi-UFJ Trust.