[NYTr] Booming Economy: Dollar hits all-time low against euro (Again)

[All the News That Doesn't Fit]

[... and oil hit its all-time high today as well. -NYTr]

Financial Times - Oct 18, 2007
http://www.ft.com/cms/s/0/be56415e-7d5e-11dc-9f47-0000779fd2ac.html?nclick_check=1

Dollar hits all-time low against euro

By Peter Garnham

The dollar hit a record low against the euro on Thursday as
expectations of further cuts in US interest rates continued to weigh on
the currency.

Late in New York, the dollar had dropped 0.6 per cent to $1.4293
against the euro, surpassing the all-time trough of $1.4281 it hit
against the single currency three weeks ago.

Analysts said a recent run of disappointing US economic data had been
responsible for heightening expectations that the Federal Reserve would
move to ease monetary policy at its meeting on October 31.

“If Fed chairman [Ben] Bernanke is to conduct monetary policy in a
forward-looking manner then monetary easing at the end of the month
looks justified,” said Derek Halpenny at Bank of Tokyo Mitsubishi-UFJ.
“With the probability of a 25 basis-point cut at about 50 per cent, the
dollar is likely to remain under selling pressure.”

Analysts said the reason the dollar had not broken even lower was fear
that its weakness would have to be addressed at this weekend’s Group of
Seven meeting of finance ministers and central bankers in Washington.

However, Marc Chandler at Brown Brothers Harriman said given recent
comments from Hank Paulson, US Treasury secretary, and Rodrigo de Rato,
managing director of the International Monetary Fund, such worries
seemed unjustified. Mr Paulson dismissed claims that he would be facing
criticism from Europe over a weak dollar at the meeting, while Mr de
Rato said the dollar was overvalued and needed to fall further.

“It seems that if the IMF says the dollar needs to fall further and the
US Treasury is not prepared to change its position, the risk of action
to stem the dollar’s fall is highly unlikely,” said Mr Chandler. “We
expect dollar selling to resume next week.”

The dollar also dropped 0.9 per cent to Y115.68 against the yen, fell
0.2 per cent to $2.0446 against the pound and lost 0.9 per cent to
SFr1.1695 against the Swiss franc.

Meanwhile, the Swiss franc also rose 0.3 per cent to SFr1.6717 against
the euro after a warning from Jean-Pierre Roth, chairman of the Swiss
National Bank.

Mr Roth said the central bank would “remain particularly vigilant” to
prevent a declining Swiss franc from stoking inflation and that renewed
weakness in the currency was not justified by economic fundamentals.

“We believe this means the euro will find it harder to climb higher
against the Swiss franc in the near term,” said Mansoor Mohi-uddin at
UBS. “If the Swiss franc continues to weaken while fundamentals remain
solid, the SNB may resume monetary tightening.”

Elsewhere, the euro eased 0.3 per cent to Y165.35 against the yen, but
rose 0.4 per cent to £0.6990 against the pound.

Copyright The Financial Times Limited 2007