GO
Loading...

Dollar Hits Record Low Against Euro

The dollar fell to record lows against the euro and basket of currencies Tuesday on worries over the health of the U.S. economy and prospects of more Federal Reserve interest rate cuts.

The euro surged to $1.4982 , according to Reuters data, beating the previous all-time peak of $1.4966 touched on Nov. 23. The dollar index, which tracks the greenback's performance against six major currencies, also touched a life-time low of 74.706 .

The dollar's slide accelerated after Federal Reserve Vice Chairman Donald Kohn said risks to US economic growth were a bigger worry than inflation, suggesting further Fed interest rate cuts.

The euro rose to a session high of $1.4914, versus $1.4902 before Kohn's comments. Against the yen, the dollar fell to 107.60 yen, a decline of 0.4 percent on the day.

The dollar drop was a continuation of an early move down against the euro and yen Tuesday as U.S. economic reports left the outlook for U.S. interest rate cuts unchanged.

Data showed U.S. consumer confidence dropped in February to a 17-year trough. That
compared with a firmer German sentiment survey earlier in the global session that dampened the case for euro zone interest rate cuts.

Dollar and Euro
Dollar and Euro

A report showing U.S. producer prices were higher than expected in January had a fleeting impact on trading, despite reducing the outlook for further interest rate cuts from the
Federal Reserve.

"The U.S. economy is weakening at an accelerated pace and as long as inflation pressures don't come into the system more than they already are, the Fed should cut aggressively," said
Camilla Sutton, currency strategist at Scotia Capital in Toronto. "It's the trade-off between growth and inflation ongoing."

Midway through the New York session, the euro had risen as high as $1.4893, its highest since Feb. 1, before retreating to 1.4874, up 0.3 percent. The dollar fell 0.3 percent against the yen to 107.71 yen.

The euro had been strong for most of the session given Germany's February Ifo index beat even the highest forecast in a Reuters poll and eased concerns about the health of the euro
zone's biggest economy.

Ifo's president, Hans-Werner Sinn, said it would be premature for the ECB to cut rates yet, and markets trimmed expectations for a move by the end of June.

"This is one of those rare periods when European data will count as much as U.S. data," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut.

Against the yen, the euro touched its highest since mid-January, at 160.71 yen, before falling back to 160.18, little changed on the day.

A higher-than-expected reading on U.S. wholesale inflation failed to dent the outlook for U.S. rates compared with those in Europe.

The PPI report "is unlikely to change the outlook for monetary policy given that the Fed has signaled that it will remain focused on growth risks and not inflation," said David Powell, senior currency strategist at IDEAGlobal. "We saw a slight boost in the dollar after the number but it's not across the board. This just goes to show that markets do not see dramatic change in the interest rate outlook."

Contact FX

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More