ANOTHER NEW LOW FOR THE U.S. DOLLAR

[Anonymous]

Another New Low for the Dollar
The
dollar hit another new low Friday as U.S. inflation data reinforced
expectations that the Federal Reserve may cut interest rates again.
The
13-nation euro reached $1.4207 in late afternoon European trading –
exceeding its previous peak of $1.4189, reached Thursday, and setting
the seventh record in as many trading days. The euro had bought $1.4160
in New York late Thursday.The euro spiked above $1.42 after the release
of data showing that a key measure of inflation in the U.S. eased last
month to the slowest pace in 3 1/2 years.The 1.8 percent rise in core
inflation over the past year, which excluded energy and food, was
within the Fed’s comfort zone for core price increases of between 1
percent and 2 percent, meaning they could cut again.The data also
showed that incomes rose by 0.3 percent last month, slightly lower than
had been expected.In other trading, the British pound rose to $2.0353
from $2.0270 in New York late Thursday. The dollar was down to 115.21
Japanese yen from 115.59 yen.The dollar has been sliding since the Fed
last week cut interest rates by a larger-than-expected half percentage
point. Since then, disappointing U.S. economic data have stoked
expectations that another rate cut is on the way.Lower interest rates,
used to jump-start an economy, can weaken a currency as investors
transfer funds to countries where their deposits and fixed-income
investments bring higher returns.The European Central Bank held off on
raising its rates earlier this month, but has shown no inclination to
follow the Fed’s course and cut the cost of borrowing.Higher interest
rates are used to combat inflation. On Friday, the European Union’s
statistical agency estimated that inflation in the euro zone would hit
2.1 percent in September – jumping from 1.7 percent in August, and
putting inflation above the ECB’s guideline of just under 2 percent.

[Author]

September 28, 2007 at 11:49 AM