US dollar declines versus euro, sterling

Story link: US dollar declines versus euro, sterling

The US dollar fell to another record low in relation to the euro on Tuesday, falling to $1.4570 to the euro in Tuesday morning trade in New York.

The new declines came as investors worried that financial institution losses from the subprime crisis will grow and that the Federal Reserve will cut interest rates again when it meets next.

Citigroup (NYSE: C) and Merrill Lynch (NYSE: MER; TYO: 8675) have already announced losses and speculation is that Morgan Stanley (NYSE: MS) could announce write downs of as much as $6 billion.

At just before 1 p.m. New York time, the dollar was trading at $1.4555 to the euro, while the yen stood at ¥114.4700 to the dollar.

Meanwhile, sterling rose to a 26-year high versus the greenback on the possibility that while the Fed could cut rates again, the Bank of England will hold UK interest rates steady.

At one point in the session in London, the dollar was at $2.0907 to the pound, while it was at $2.0855 to the pound in early afternoon trade in New York.

In addition the yen was trading at ¥238.7224 to the pound as investors sold more yen to finance carry trades.

However, sterling dropped to 69.79p to the euro in New York trade.

The gains by sterling in relation to the US dollar and the yen came even as the Bank of England’s governor said that it will likely be several more months before the full extent of losses related to the subprime problems in the US will be known.