Dollar index plumbs 15-yr lows ahead of Fed cut

LONDON - The dollar hit a 15-year low against a basket of major currencies for the fifth consecutive day on Thursday as investors braced for an expected Federal Reserve interest rate cut next week.

By (Reuters)

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Published: Thu 13 Sep 2007, 6:21 PM

Last updated: Sat 4 Apr 2015, 11:41 PM

The greenback -- which also set record lows versus the euro and three-decade troughs against the Canadian dollar -- has been under pressure since Friday, when an unexpectedly weak U.S. jobs report fuelled speculation that the Fed may cut rates by as much as 50 basis points on Sept. 18 from the current 5.25 percent.

The unexpected fall in U.S. employment levels suggested that the U.S. economy may be hit more than previously expected by the turmoil in financial and credit markets, which spiralled out from troubles in the U.S. subprime mortgage sector.

Dollar weakness “has been the strong trend for the past few days, ever since we got the payrolls number. The market is now pricing in the fact that what we are seeing in financial markets ... is probably going to be a lot more negative for the U.S. eonomy than economies elsewhere,” said Adarsh Sinha, currency strategist at Barclays Capital.

“We think that further (dollar) weakness is likely ahead.”

By 1058 GMT, the dollar index had fallen to 79.302 -- its lowest since 1992, when it had set an all-time trough of 78.19. It last traded at 79.529.

The euro set a record high of $1.3927, according to Reuters data, before easing back to $1.3886.

The U.S. dollar was down a third of a percent at C$1.0334, just off an earlier 30-year low at C$1.0316.

One exception though was the yen, which lost ground broadly, including against the dollar. Analysts cited short-term positions adjustments as well as political uncertainty after Prime Minister Shinzo Abe’s shock announcement on Wednesday that he will step down.

The yen was down 0.4 percent against the euro at 159.41 . It fell 0.6 percent versus the dollar to 114.76.

SNB, RBNZ

The Swiss franc was steady versus the euro ahead of a Swiss National Bank rate decision. Most economists expect the SNB to hold rates at 2.5 percent, but a sizeable minority are expecting a 25 basis point hike.

“We believe the SNB will indeed tighten, which given the uncertainty over the outcome, could see Swiss franc gains. That said, 3-month targeted Libor is already trading at 2.90 percent, perhaps limiting any upside,” ING said in a research note.

The high-yielding Australian and New Zealand dollars both slipped on Thursday, partly after data showed retail sales in New Zealand were flat in July from a month earlier compared with forecasts for a 0.2 percent gain.

The report followed the Reserve Bank of New Zealand’s decision to keep rates on hold at 8.25 percent, the highest among developed economies, with the central bank acknowledging signs of slowing demand but saying inflation remained a worry..

Elsewhere, sterling fell to a six month low against the euro

as weak UK housing data added weight to expectations that UK interest rates have peaked.



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