Friday, September 28, 2007
Dollar Hits Seventh Consecutive Low
BERLIN (AP) -- The dollar hit another new low Friday as U.S. inflation data reinforced expectations that the Federal Reserve may cut interest rates again.
The 13-nation euro reached $1.4234 in late afternoon European trading -- exceeding its previous peak of $1.4189, reached Thursday. It was the seventh trading day in a row on which the euro broke the record from the previous day. The euro had bought $1.4160 in New York late Thursday.
The euro spiked above $1.42 after the release of data showing that a key measure of inflation in the U.S. eased last month to the slowest pace in 3 1/2 years.
The 1.8 percent rise in core inflation over the past year, which excluded energy and food, was within the Fed's comfort zone for core price increases of between 1 percent and 2 percent, meaning they could cut again.
The data also showed that incomes rose by 0.3 percent last month, slightly lower than had been expected.
In other trading, the British pound rose to $2.0353 from $2.0270 in New York late Thursday. The dollar was down to 115.21 Japanese yen from 115.59 yen.
The dollar has been sliding since the Fed last week cut interest rates by a larger-than-expected half percentage point. Since then, disappointing U.S. economic data have stoked expectations that another rate cut could follow.
Lower interest rates, used to jump-start an economy, can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.
Higher interest rates are used to combat inflation. On Friday, the European Union's statistical agency estimated that inflation in the euro zone would hit 2.1 percent in September -- jumping from 1.7 percent in August, and putting inflation above the ECB's guideline of just under 2 percent.
That could lead market participants to expect that the ECB might go on raising interest rates instead of pausing amid market turmoil from the U.S. housing credit crisis.
Longer term, the U.S. has been running large trade and budget deficits for years -- factors that tend to undermine a country's currency in the long term, unless they are offset by foreigners willingness to invest their money in the United States.
Consequences of the dollar's fall include upward pressure on inflation from higher prices for imported food and goods, and less purchasing power for Americans traveling or living abroad. On the other hand, a cheaper dollar makes U.S. exporters' wares more competitive on a price basis overseas.
The 13-nation euro reached $1.4234 in late afternoon European trading -- exceeding its previous peak of $1.4189, reached Thursday. It was the seventh trading day in a row on which the euro broke the record from the previous day. The euro had bought $1.4160 in New York late Thursday.
The euro spiked above $1.42 after the release of data showing that a key measure of inflation in the U.S. eased last month to the slowest pace in 3 1/2 years.
The 1.8 percent rise in core inflation over the past year, which excluded energy and food, was within the Fed's comfort zone for core price increases of between 1 percent and 2 percent, meaning they could cut again.
The data also showed that incomes rose by 0.3 percent last month, slightly lower than had been expected.
In other trading, the British pound rose to $2.0353 from $2.0270 in New York late Thursday. The dollar was down to 115.21 Japanese yen from 115.59 yen.
The dollar has been sliding since the Fed last week cut interest rates by a larger-than-expected half percentage point. Since then, disappointing U.S. economic data have stoked expectations that another rate cut could follow.
Lower interest rates, used to jump-start an economy, can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.
Higher interest rates are used to combat inflation. On Friday, the European Union's statistical agency estimated that inflation in the euro zone would hit 2.1 percent in September -- jumping from 1.7 percent in August, and putting inflation above the ECB's guideline of just under 2 percent.
That could lead market participants to expect that the ECB might go on raising interest rates instead of pausing amid market turmoil from the U.S. housing credit crisis.
Longer term, the U.S. has been running large trade and budget deficits for years -- factors that tend to undermine a country's currency in the long term, unless they are offset by foreigners willingness to invest their money in the United States.
Consequences of the dollar's fall include upward pressure on inflation from higher prices for imported food and goods, and less purchasing power for Americans traveling or living abroad. On the other hand, a cheaper dollar makes U.S. exporters' wares more competitive on a price basis overseas.
European Inflation Expected to Jump
BRUSSELS, Belgium (AP) -- Inflation in the 13 nations that use the euro is expected to jump to 2.1 percent for September, according to preliminary figures released by the European Union's statistical agency on Friday.
The news added to worries that Europe is heading for an economic slowdown.
Eurostat's estimate did not give reasons for the rise from 1.7 percent in August, an increase that puts inflation above the European Central Bank's guideline of just under 2 percent.
A final figure is expected to be issued next month.
Germany's Federal Statistics Office on Thursday released preliminary figures which showed the consumer price index for Europe's biggest economy is expected to rise 2.5 percent in September.
EU Economic and Monetary Affairs Commissioner Joaquin Almunia told a meeting in Barcelona that the recent financial turmoil, including the high value of the euro against the U.S. dollar and the credit market turmoil in the United States, has increased the risk of growth slowing.
Almunia expressed worries that rising costs could dissuade investments and consumer spending.
"There are now more negative risks," Almunia said. "The key factor will be the impact (of the financial crisis) on confidence."
He said, however, that most forecasts are for world economic growth of over 4 percent next year.
Almunia earlier this month raised the EU's forecast for inflation for the full year, up 0.1 percentage points to 2 percent.
Almunia also said concerns are growing over the dropping U.S. dollar. He told Italian daily Il Sole 24 Ore in an interview published Friday that the dollar's decline is "worrying," adding the U.S. should assume more responsibility for the "imbalances in the global economy."
"Nobody should expect that we will remain passive if the consequences of those imbalances are dumped on the euro-zone economies alone," he said.
The dollar's declining value makes American exports more competitive overseas, but could make European products more expensive in the United States.
Almunia appealed to euro-group countries to ensure they speak with one voice in communicating their views with the ECB.
EU officials have warned that they were unsure of how well the euro economy could continue to grow amid a credit crisis triggered by problems in the U.S. housing market that has raised borrowing costs.
The European Commission said that Europe and the world economy had been in good shape until the August turmoil, when banks became reluctant to lend amid fears of spiraling losses from the U.S. housing loan market.
AND JUST HOW LOW WILL RATES GO IF THE STRONGER OF THE TWO CURRENCY HAS INFLATION TO FIGHT? lol
The news added to worries that Europe is heading for an economic slowdown.
Eurostat's estimate did not give reasons for the rise from 1.7 percent in August, an increase that puts inflation above the European Central Bank's guideline of just under 2 percent.
A final figure is expected to be issued next month.
Germany's Federal Statistics Office on Thursday released preliminary figures which showed the consumer price index for Europe's biggest economy is expected to rise 2.5 percent in September.
EU Economic and Monetary Affairs Commissioner Joaquin Almunia told a meeting in Barcelona that the recent financial turmoil, including the high value of the euro against the U.S. dollar and the credit market turmoil in the United States, has increased the risk of growth slowing.
Almunia expressed worries that rising costs could dissuade investments and consumer spending.
"There are now more negative risks," Almunia said. "The key factor will be the impact (of the financial crisis) on confidence."
He said, however, that most forecasts are for world economic growth of over 4 percent next year.
Almunia earlier this month raised the EU's forecast for inflation for the full year, up 0.1 percentage points to 2 percent.
Almunia also said concerns are growing over the dropping U.S. dollar. He told Italian daily Il Sole 24 Ore in an interview published Friday that the dollar's decline is "worrying," adding the U.S. should assume more responsibility for the "imbalances in the global economy."
"Nobody should expect that we will remain passive if the consequences of those imbalances are dumped on the euro-zone economies alone," he said.
The dollar's declining value makes American exports more competitive overseas, but could make European products more expensive in the United States.
Almunia appealed to euro-group countries to ensure they speak with one voice in communicating their views with the ECB.
EU officials have warned that they were unsure of how well the euro economy could continue to grow amid a credit crisis triggered by problems in the U.S. housing market that has raised borrowing costs.
The European Commission said that Europe and the world economy had been in good shape until the August turmoil, when banks became reluctant to lend amid fears of spiraling losses from the U.S. housing loan market.
AND JUST HOW LOW WILL RATES GO IF THE STRONGER OF THE TWO CURRENCY HAS INFLATION TO FIGHT? lol
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