The dollar fell to its lowest level against a basket of major currencies on speculation that credit- market losses and slowing economic growth will push the Federal Reserve to cut borrowing costs a third time this year.
Japan’s yen and the Swiss franc led gains this week versus the dollar as financial companies from the U.S. to Europe reported writedowns amid losses from subprime mortgages, pushing investors to shun higher-yielding assets. The U.S. currency declined for a fifth week versus the euro. The dollar may weaken next week on reports forecast to show a drop in home sales and a slowdown in retail sales growth.
“The rate-cut expectation is really the market’s hope that the Fed is going to bail out the financial sector,” said Kathy Lien, chief currency strategist at DailyFX.com in New York. “That is really what is driving the dollar down.”
The dollar fell 1.2 percent to $1.4678 per euro this week and touched $1.4752 yesterday, the weakest level since the European currency started trading in January 1999. The U.S. currency dropped 3.6 percent to 110.69 yen during the same period, the most since December 2005. The dollar reached 110.51 yesterday, the cheapest level since May 2006.
The euro strengthened above $1.4536 this week, which is the equivalent to the deutsche mark’s record high of 1.3455 against the dollar in March 1995.