US Dollar Touches New Euro Low

[AYHJA]

Monday, 22 October 2007, 21:44 GMT 22:44 UK

The US dollar tumbled to a new euro low in Asian trade as concerns over the state of the US economy deepened

(BBC) -- The euro traded as high as $1.4348, breaking its last record set on Friday when one euro bought $1.4319.

The sell-off was triggered on Friday by a profit warning from building equipment giant Caterpillar, prompting concerns over the slowing US economy.

But the dollar bounced back to trade at $1.4181 against the euro bloc's currency at the close of trade.

The greenback also slipped to a six-week low againt the Japanese yen on Monday, touching 113.25 yen at one point, but gained against the British pound to trade at $2.0322 after initial falls.

The dollar could weaken further if the US Federal Reserve cuts interest rates again at its meeting at the end of the month, making the US currency less attractive for income seekers.

Source: http://tinyurl.com/39dvh8

[AYHJA]

Can someone w/a more diverse background in finances and economics talk about what it means when the value of the dollar rises and falls..?

[Brains]

i am far from a finance buff, but as far as I have understood, this all means that your economy is not exactly performing stellarly the last few months, or even years.

consumers have difficulties paying their loans. investors are losing confidence in the dollar. in order to re-attract investments in the American industry, the federal reserve has cut intrest rates last months. This has advantages and disadvantages. The big advantage is that it is cheaper to lend money (to inject back into the system). The disadvantage is that US equity is worth less all of a sudden which triggers a further spiral of the dollar being less interesting than stronger currencies.

With the .50% points cut not being adequate, analysts expect a further .25% points drop on interest rates in order to fuel economy.

Good is that with the Euro being so strong against the dollar, it is cheap for us to buy things there. bad is that we have a hard time selling our goods there, since they are considered expensive.

As to why this is happening (and I do not expect an end to it soon - but who am I?!), you should re-visit Greenspan's comments on the economical policy of the last 2 presidential terms. In short: spend obscene amounts of money you do not even have, have tax cuts for the riches - bringing the poor to trouble, and invest in a foreign war, while you should be investing in your country. oh well.