Dollar Slides to Record Low Against Euro Before Housing Data

Kim-Mai Cutler and Kosuke Goto
Bloomberg
Tuesday November 20, 2007

The dollar fell to a record low against the euro and the Swiss franc on speculation a U.S. government report will show a deepening property slump, prompting the Federal Reserve to lower interest rates.

The U.S. currency declined as economists forecast Commerce Department data today will show U.S. housing starts slipped to a 14-year low in October, prompting traders to raise bets the Federal Reserve will cut interest rates by December. The dollar also slid on speculation a group of six Arab nations will change their fixed exchange rates to the U.S. currency. The yen declined versus all 16 of the major currencies as European stocks rose.

``Credit and housing difficulties are continuing to rumble on,'' said Adam Cole, senior currency strategist at RBC Capital Markets Ltd. in London. ``There's more bad news in the pipeline, raising speculation the Fed is going to cut rates again.''

The dollar weakened to $1.4776 per euro as of 10:51 a.m. in London from $1.4665 late yesterday in New York. It touched $1.4797, the lowest since the 13-nation currency was started in 1999. It traded at 110.24 yen from 109.76 yen.

Cole forecasts the euro will fall to $1.45 and the yen will decline to 115 against the dollar by year-end.

The dollar fell to a record low of 1.1070 versus the franc from 1.1152 yesterday, and was last at 1.1086.

The yen fell as Asian stocks pared earlier declines, giving traders confidence to buy higher-yielding assets funded with loans from Japan. The currency slid 1.4 percent against the New Zealand dollar as investors returned to so-called carry trades.

Full article here.