Dollar dips to new low vs euro

Business Materials 25 September 2007 02:38 (UTC +04:00)

( Reuters ) -The dollar hit a record low against the euro for the third straight session on Monday amid fears that a deepening housing slump could rein in economic growth and trigger more cuts in U.S. interest rates.

Trade was light as attention shifted to existing-home sales and consumer confidence data due on Tuesday.

Investors are worried that weak economic reports will push the Federal Reserve to follow last week's half-percentage-point rate cut with more policy easing, further eroding the dollar's yield advantage over other currencies, particularly the euro.

After last week's cut, U.S. benchmark interest rates stand at 4.75 percent, compared with 4 percent in the euro zone.

"Rate differentials will continue to be the main driver, and as long as we see U.S. data on the weak side markets will expect further Fed easing, putting more pressure on the dollar to weaken," said Paresh Upadhyaya, who helps manage about $29 billion in currency assets at Putnam Investments in Boston.

Several Wall Street firms have downgraded their outlook on U.S. gross domestic product over the next several quarters.

The euro was at $1.4088 after earlier hitting a record high $1.4130, according to Reuters data.

Upadhyaya said options barriers around $1.4150 were likely over the coming days to act as "a magnet for the market" as traders try and push the euro through that level.