Reply #15: Dollar Falls to Record Low of $1.50 per Euro on Rate Outlook [View All]

[Ghost Dog]

Feb. 27 (Bloomberg) -- The dollar fell to a record low beyond $1.50 per euro on speculation Federal Reserve Chairman Ben S. Bernanke will indicate the U.S. central bank is prepared to cut interest rates already at a three-year low.

The dollar weakened against 15 of the 16 most-active currencies before Bernanke testifies to Congress today. It reached a 23-year low against the New Zealand dollar and fell the most against South Africa's rand as investors bought higher- yielding currencies.

``We're going into a new leg of dollar weakness,'' Tony Morriss, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd., Australia's third-biggest bank, said in an interview with Bloomberg Television. ``The Federal Reserve is sending a pretty clear signal they need to support growth.''

The dollar touched $1.5057 per euro, the lowest since the European single currency was introduced in 1999, before trading at $1.5043 as of 7:39 a.m. in London from $1.4974 in late New York yesterday. It also fell to 106.96 yen from 107.28 yen. The euro was at 160.79 yen from 160.67, after reaching 161.39. The dollar may drop to $1.53 per euro in the next three months, Morriss said.

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The slump in the dollar pushed oil prices to a record yesterday and increased the cost of buying wheat, sugar, copper, cotton and cocoa. Nine of the 10 most-active currencies in Asia outside Japan gained against the dollar today. Indonesia's rupiah rose 0.2 percent to 9,060 per dollar and the Singapore dollar touched an 11-year high of S$1.3995. The Chinese yuan advanced 0.2 percent to 7.1470.

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The dollar will tumble to a record low against the currencies of major trading partners ``within weeks'' as the Fed lowers rates to prevent a recession, Bank of America N.A. analysts said in a research note dated today.

The currency will continue to trade below $1.50 for the next few weeks, Robert Sinche, head of global currency strategy at the New York-based bank, wrote in the report. An index traded on ICE Futures in New York, which tracks the currency against its six major counterparts, fell 0.2 percent to 74.611. It reached 74.484 on Nov. 23, the lowest since the gauge started trading in 1973.

``It's crunch time for the dollar,'' said Yuji Saito, head of foreign-exchange sales in Tokyo at Societe Generale SA, a unit of France's second-largest bank by market value. ``Bernanke may know that monetary policy alone cannot support the slowing U.S. economy.''

The U.S. currency may fall to $1.51 today, Saito forecast.

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