US dollar continues declines

Story link: US dollar continues declines

The US dollar fell to another record low versus the euro on Friday when it slipped to $1.5688 to the shared currency before gaining back some losses in midday trade in New York, while the dollar also dropped to a 12-year low versus the yen and fell below parity with the Swiss franc for the first time ever.

The losses for the dollar came as the Federal Reserve and JP Morgan Chase (NYSE: JPM; TYO: 8634) announced a program of rescue funding for Bear Stearns (NYSE: BSC) that raised concerns that credit market losses are not yet over.

The relief for Bears Stearns came after its CEO said that its liquidity position had “significantly deteriorated” in the past day.

The dollar also fell after some traders bet that the Fed will cut US interest rates by a full percentage point next week, while the rest believe that the cut will amount to three-quarters of a percentage point.

Near noon in New York the dollar traded at $1.5613 to the euro and at $2.0305 to the pound, while it took ¥100.2250 to buy a dollar after it took as little as ¥99.57 to buy a dollar earlier in the session.

The continuing declines for the dollar have some analysts beginning to suggest that there could be an effort by central banks to shore up the weakening currency, although some believe that such an attempt could be unsuccessful as long as the Federal Reserve continues to cut interest rates but the European Central Bank continues to hold rates steady.

While the news from Bear Stearns hurt the dollar, its effect of frightening investors away from carry trades helped the yen and the Swiss franc, both of which were up in relation to most major currencies on the day.

The yen traded at ¥156.4826 to the euro and at ¥203.5067 to the pound, while the Swiss franc traded at SFr1.0065 to the dollar after gaining to SFr0.9988 to the US currency for the first time ever.