Dollar drops to new lows

Published: Saturday, March 1, 2008 at 6:01 a.m.
Last Modified: Friday, February 29, 2008 at 9:14 p.m.

BERLIN - The dollar kept spiraling down Friday, hitting another low against the euro and dropping to a three-year record against the yen as worries about the U.S. economy depress the currency and raise thorny issues in Europe about how to cope with the growing gap.

The euro flew past its previous high to hit $1.5238, before subsiding to $1.5194 late in New York. The euro topped $1.50 this week for the first time since being introduced in 1999 at $1.17, then surged above $1.51 after markets took comments from Fed Chairman Ben Bernanke as a sign that yet more U.S. rate cuts are on the way.

"The dollar looks set to finish the month with yet more downside pressure being heaped upon it," said Gary Thomson of CMC Markets in London.

The dollar also slumped to 103.96 Japanese yen on Friday from 105.36 the night before. The dollar has not been that low since March 2005. The dollar also fell to 1.0433 Swiss francs from 1.0503 Swiss francs, hitting a record low of 1.0410 francs, according to Dow Jones' Interbank foreign exchange rates.

The two "carry-trade currencies" tend to trade inversely to the market. The Dow Jones industrial average dropped more than 300 points in late trading in New York. Carry traders borrow currencies from countries with low interest rates and investing the funds in higher-yielding assets, such as the New Zealand dollar and the euro.

The euro's looming ascent has some of the United States' large trading partners in Europe considering their options and drawing two very different reactions: alarm from the French, equanimity from the Germans.

Germany's manufacturing giants are keeping one eye on the record-high euro and the other to the future, devising new strategies to mitigate the effect of the strong currency on their bottom line. In France the concern is more palpable, with politicians calling for the European Central Bank to intervene to put the brakes on the euro's surge.

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