Dollar falls to new record low vs euro on looming rate cut

Dollar falls to new record low vs euro on looming rate cut - UPDATE

	Published : Mon, 29 Oct 2007 04:14 By : Agencies Print this Story

TOKYO (Thomson Financial) - The dollar sank to a new record low against the euro in Asian trade Monday as market players grew increasingly confident about the prospect of another US interest rate cut this week.

The euro hit 1.4426 dollars in Tokyo morning trade, breaking the 1.44 level for the first time since the creation of the single European currency in 1999.

The euro later eased back to 1.4409 dollars, up from 1.4391 dollars in New York on Friday.

The dollar slipped to 114.14 yen from 114.24 yen in New York, while the euro rose to 164.46 yen from 164.37 yen.

'The market is confident about selling the dollar because the Federal Reserve is expected to cut rates again' on Wednesday, said Kenichi Yumoto of Societe Generale.

'The dollar will be under pressure at least until the meeting as we are unlikely to see news that would erase uncertainty over the US economy by then,' he said.

The Fed is widely expected to trim its benchmark short-term federal funds rate by a quarter of a percentage point this week after slashing it by a hefty 50 basis points last month.

There has been some speculation the Fed might even lop another half point off the key rate again, but analysts said such a large reduction appeared unlikely this time.

'The Fed is not in a situation that warrants cutting the rate as aggressively as the last time,' said Sumitomo Trust Bank forex strategist Saburo Matsumoto.

'As commodities prices are surging ahead, there also are concerns over inflation,' which could be fuelled by lower interest rates, Matsumoto said.

The central bank slashed borrowing costs by half a percentage point on Sept 18 to 4.75 percent in the face of the housing slump and a credit crunch that is shaking the financial sector.

Worries about the slowing US economy, especially its housing market, which has been mired in a downturn since early 2006, continue to weigh on the dollar.

The market is waiting anxiously for fresh US data this week, including Friday's monthly labor

market report, for fresh clues on the health of the world's largest economy.

The yen was higher against the dollar as players cut back on risky carry trades that involve selling low-return currencies for higher-yielding ones, but it lost ground against the euro, traders said.

'The dollar and yen remained the weak pair of currencies,' said Matsumoto.

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Dollar falls to new record low vs euro on looming rate cut - UPDATE