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Euro falls to one-year low against dollar

Latest update : 2008-10-03

The euro hit its lowest point against the US currency since September 18, 2007, falling to 1.3856 dollars in early trading on Thursday after US Senate approved the $700 billion bailout plan.

The euro hit its lowest point in 13 months against the dollar Thursday on growing speculation eurozone interest rates will be cut soon to offset the impact of unprecedented turmoil on global markets.
The dollar got support after the US Senate passed a massive 700-billion-dollar bailout plan for troubled banks, making it more likely the House of Representatives will reverse Monday's rejection and approve it.
At 2100 GMT, the euro was at 1.3818 dollars, coming off 13-month lows of 1.3748 dollars earlier but still down sharply from 1.4009 dollars late Wednesday in New York.
The euro hit a record high of 1.6038 dollars on July 15.
The dollar dipped to 105.28 yen from 105.73 yen.
Analysts said they expected the European Central Bank to be forced to cut rates soon despite Thursday's decision to take no action, leaving its key rate at 4.25 percent.
"The chance that the ECB will soon ease monetary policy has increased," said Zach Witton at
Citigroup analysts wrote that ECB chief Jean-Claude Trichet's comments made a November eurozone rate cut likely.
"We now expect a rate cut in November and do not rule out that the ECB will participate in a coordinated action with other central banks before the next ... meeting."
Trichet cited "the extraordinarily high level of uncertainty" on financial markets and added that "the economic outlook is subject to increased downside risks."
Analysts highlighted the abrupt change from previous meetings when the ECB chief had emphasized risks that inflation could spiral out of control.
In the US, the dollar saw little impact from weak economic news including a sharp rise in weekly jobless claims and a drop in industrial output.
Terri Belkas at Forex Capital Management said the US data "has generally been absolutely abysmal lately," and that traders were expecting a half-point cut in rates by the US Federal Reserve. But she said much of this has already been priced into the dollar and that weakness in other economies is taking the market by surprise.
"Signs of recession are popping up all over the place," she said. "In the eurozone, UK, Japan, Australia, and New Zealand, economic indicators have been extremely disappointing, and with the US recession likely priced in already, there is room for currencies like the euro and British pound to fall lower," she added.
In late New York trade, the dollar stood at 1.1353 Swiss francs from 1.1257 Wednesday.
The pound was at 1.7635 dollars after 1.7693.

Date created : 2008-10-02