Euro Reaches Record High Against Hapless Dollar
September 12, 2007
The dollar has closed down a record low against the Euro, surpassing the previous record set on 24 July of this year with the Federal Reserve poised to slash interest rates to bolster the economy.
The dollar has fallen to $1.3880 to the euro, beyond the $1.3852 record low set in July off the back of increasing speculation that the Federal Reserve will cut interest rates at the next opportunity, seeing the sixth consecutive weakening against the euro.
The turbulent housing market has been at the centre of the dollar’s bad fortune along with increasingly volatile stock market trading, seeing investment in US business significantly weak to the detriment of the economy as a whole.
The Federal Reserve are set to meet next week to discuss interest rate policy for the next month, with recent market volatility and the threat of a global credit crunch likely to be at the forefront of any decision.
With the sub-prime crisis still in full swing, any cut in interest rates will stabilise lending markets by reducing the cost of variable mortgage repayments, which should have the effect of reducing the number of foreclosures and defaults, as one step towards remedying the shortage of liquidity.
Additionally, cutting interest rates will make borrowing more affordable for consumers and businesses alike, which prompts increased consumer spending and business growth. Analysts are predicting that should the Federal Reserve cut rates as expected, the US economy should see some strong growth over the next few months, with some form of stability likely to return to the troubled economy.
The Federal Reserve is poised to meet to discuss interest rate policy next week. The US main interest rate currently stands at 5.25%, and any cut would see interest rates fall for the first time since 2003.