Dollar Hits New Low as Economic Woes Continue
RENEE MONTAGNE, host:
NPR's business news starts with the dollar descending to new lows.
You might remember the day when one dollar bought you one euro. Now you need $1.52 to buy a euro. That's a new low for the U.S. currency. It hit that mark in currency trading yesterday. The dip comes amid continued worries about the U.S. economy. It also comes on the heels of comments from Federal Reserve Chairman Ben Bernanke. Bernanke says he's prepared to lower interest rates again, which could make the dollar even weaker.
But as Eleanor Beardsley reports from Paris, some European analysts are expecting relief for the dollar.
ELEANOR BEARDSLEY: The dollar's three-day slide against the euro is the steepest since January 2004. And on Thursday the European currency jumped to an all-time high of 1.52 against the dollar, breaking the symbolic and very psychological euro-dollar barrier of 1.50.
The dollar's fall is fueled by subprime mortgage losses, the worst housing market in 25 years, and soaring credit costs. The worsening economic situation has spurred the Federal Reserve to cut rates five times since September. But the European Central Bank has not followed suit with a rate cut.
European Central Bank president Jean-Claude Trichet says his responsibility is to ensure stability while avoiding additional volatility, which could lead to inflation. The interest rate differential has caused short term investments to flow out of U.S. dollars and into euros, worsening the dollar's slide, says Hans Redeker, an analyst with investment bank Paribas. But Redeker believes an end to the dollar crisis is in sight.
Mr. HANS REDEKER (Paribas): What we are going to see in the next few weeks and months or so, weaker economic activity in Europe, and the European Central Bank has to address that as well in its assessment of monetary policy.
BEARDSLEY: Redeker says he expects a European interest rate cut by June at the latest, which could help align rates with those in the U.S. and help lower the soaring euro. That might bring some relief to Americans who are traveling and living in Europe. It would also help Europe's exporters, who send goods to the U.S. They are being killed by the powerful euro, which is making their products increasingly expensive and encouraging talk from some European companies of setting up manufacturing operations in the U.S.
For NPR News, I'm Eleanor Beardsley in Paris.
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