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Euro Hits Eight Month Dollar Low

Wednesday, 03 Sep 2008 09:22 AM

The euro on Wednesday fell below 1.44 dollars for the first time since late January as the market continued to anticipate lower interest rates for the eurozone.

The euro dropped to 1.4385 dollars in London trading. It later stood at 1.4396 dollars from 1.4517 in New York late on Tuesday.

Sterling meanwhile hit a fresh record low against the euro and near 2.5-year trough versus the dollar as Britain is forecast to fall into recession before the end of 2008.

"The euro is faced with further downside risks, both against the dollar and the yen," a trader told Dow Jones Newswires.

Dealers said that a slide in oil prices should dampen inflation and leave more room for the European Central Bank and the Bank of England to reduce interest rates, making European currencies less attractive to investors.

In the short term, however, the ECB and BoE were both expected to leave their key lending rates unchanged at their next meetings on Thursday.

"Some are speculating that the Bank of England might perhaps deliver a surprise rate cut" as soon as Thursday, said Mitsubishi UFJ Trust and Banking chief foreign exchange manager Hideaki Inoue. British borrowing costs stand at 5.0 percent and ECB rates at 4.25 percent.

Oil prices fell on Wednesday after the US government decided to tap its strategic reserves after Hurricane Gustav had brought a halt to energy production in the Gulf of Mexico.

While the US economy is in bad shape, analysts say, the outlook appears even bleaker elsewhere.

The Organisation for Economic Cooperation and Development on Tuesday raised its forecast for growth in the US economy this year while downgrading its outlook for the eurozone, Japan and Britain, which it said would enter recession this year.

The United States is now expected to grow faster than the eurozone and Japan, "a theme which has helped the dollar recover over the past one and a half months," NAB Capital strategists wrote in a note to clients.

In London trading on Wednesday, the euro changed hands at 1.4396 dollars against 1.4517 late on Tuesday, at 156.47 yen (157.61), 0.8136 pounds (0.8142) and 1.6064 Swiss francs (1.6062).

The dollar stood at 108.56 yen (108.55) and 1.1145 Swiss francs (1.1063).

The pound was at 1.7719 dollars (1.7829).

On the London Bullion Market, the price of gold dropped to 792.59 dollars per ounce from 798.50 dollars late on Tuesday.

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The euro on Wednesday fell below 1.44 dollars for the first time since late January as the market continued to anticipate lower interest rates for the eurozone.The euro dropped to 1.4385 dollars in London trading. It later stood at 1.4396 dollars from 1.4517 in New York...
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2008-22-03
 

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