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Dollar Falls To Record Low

October 28, 2007

The dollar fell to a record low against the euro on speculation the Federal Reserve will cut interest rates this week as a U.S. housing slump reverberates through the economy. The U.S. currency also slid to its lowest in 23 years versus Australia’s dollar as prospects the Fed will lower its 4.75 percent overnight lending rate between banks by at least a quarter-percentage point on Oct. 31 prompted investors to seek higher-yielding assets overseas. Yields on two-year Treasuries are near the lowest since September 2005.

“I remain bearish on the dollar,” said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. “The U.S. has the lowest yields of all other major countries except Japan and Switzerland. This is sending people into a whole range of higher-yielding currencies.”

The dollar fell as low as $1.4426 per euro, the weakest since the introduction of the 13-nation common currency in 1999, before trading at $1.4408 as of 9:41 a.m. in Tokyo from $1.4393 in late New York on Oct. 26. It may drop as low as $1.4530 this week, Gibbs said.

The U.S. currency fell against 10 of the 16 most-actively traded currencies, declining the most against the higher- yielding dollars of New Zealand and Australia. It slid to 76.95 cents versus New Zealand’s from 76.62 late last week and as low as 92.15 cents against Australia’s dollar, the weakest since May 1984, before buying 92.07 from 91.84 on Oct. 26.

The U.S. dollar was at 114.25 yen from 114.19 yen.

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