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US dollar touches a new euro low | US dollar touches a new euro low |
(about 9 hours later) | |
The US dollar tumbled to yet another new low against the euro, as speculation mounted that US interest rates would be cut again next week. | The US dollar tumbled to yet another new low against the euro, as speculation mounted that US interest rates would be cut again next week. |
The euro hit $1.4394 by late trade in New York, breaking the record set last Friday, when one euro bought $1.4319. | |
And the pound hit a three-month high against the dollar at 2.0574. | |
A slew of weak data - including a drop-off in durable goods sales and plummeting demand for new homes - has underlined woes in the US economy. | A slew of weak data - including a drop-off in durable goods sales and plummeting demand for new homes - has underlined woes in the US economy. |
Rate cut risks | Rate cut risks |
The Federal Reserve is due to meet next week, having last month reduced interest rates from 5.25% to 4.75% in a bid to rejuvenate the economy. | The Federal Reserve is due to meet next week, having last month reduced interest rates from 5.25% to 4.75% in a bid to rejuvenate the economy. |
And many observers expect a further rate cut to at least 4.25% as policymakers try to lift the economy, which is showing increasing signs of suffering from a slump in house prices and higher credit costs. | And many observers expect a further rate cut to at least 4.25% as policymakers try to lift the economy, which is showing increasing signs of suffering from a slump in house prices and higher credit costs. |
"The run of downbeat economic data out of the US is underlining the fact that the Fed's last rate cut of 50 basis points clearly hasn't been sufficient to kick-start demand," said CMC Markets analyst James Hughes. | "The run of downbeat economic data out of the US is underlining the fact that the Fed's last rate cut of 50 basis points clearly hasn't been sufficient to kick-start demand," said CMC Markets analyst James Hughes. |
However, there are risks associated with further rate cuts, economists say. | However, there are risks associated with further rate cuts, economists say. |
While they can jump-start the economy, they can also weaken a currency as they encourage investors to transfer funds to currencies where they can get higher returns. | While they can jump-start the economy, they can also weaken a currency as they encourage investors to transfer funds to currencies where they can get higher returns. |
And there is a risk of inflation becoming a greater problem if money is made cheaper to borrow, encouraging more consumer spending and takeover activity. | And there is a risk of inflation becoming a greater problem if money is made cheaper to borrow, encouraging more consumer spending and takeover activity. |
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